The Risks and Rewards of Reverse Mortgages

Reader Comments
Back to article

HOW DOES BANKRUPTCY (5 YEARS AGO) AFFECT IT OR THE POTENTIAL OF GETTING ONE?

Ernest L Lester Sr of PA 3:30PM October 20, 2010

It depends on the terms of the reverse mortgage - check them carefully. My mother took out a predatory reverse mortgage that charged her an outrageous 9.95% and demanded half the value of the appreciation of her house - which went way up in value after she took out the mortgage. Looks like her estate will have to pay the bank more than a million dollars on what started out as a $120,000 loan - which included the cost of buying her an annuity from Met Life. What a rip-off. At 78 years old, she didn't understand the complexity of the deal, nor its ramification. She trusted the numbers on the paperwork she was given and the assurances of her local bank which helped sell the monstrous thing to her. When she realized how much the bank would be getting out of her estate after she died she was terribly upset, but there was no recourse.

Sunny H of NY 11:09PM September 13, 2010

The Reverse Mortgage does protect Seniors and the investment in a declining real estate market. Unlike the option arm, you are not required to make a mortgage payment. If the property depreciates lower than the loan payoff, the proceeds the loan have been protected from the downside risk. There is no recourse when the occupants have passed on, so the heirs are not liable if the property is upside down. This loan is a no brainer in a stagnent or declining market. Can you or your heirs get an approval for an investment property mortgage when the owners have deceased? Can you afford to carry the property in a poor real estate market until it is sold and then pay the realtor commissions of at least 6%.
Personally, I would prefer to inherit the cash or investments
rather than deal with the real estate when my parents pass on.

Justin Case of AZ 1:28PM October 06, 2009

I for one, love the Reverse Mortgage. I believe it can be used in so many positive ways. I have been in the mortgage industry for 11 consecutive years now and have focused exclusively on the Reverse Mortgage for the past three years. I did not even consider the Reverse Mortage until my parents benefitted from it.. The only drawback for me is a lessened inheritance of real estate, but, I have peace of mind that my parents have everything they need financially which suits me just fine.

O. Hanson of CA 12:04PM October 06, 2009

It's neither!!!!
A reverse mortgage is NEEDS based and should be view as such.
I rarley serve a reverse - senior client that is merely trying to re-deploy their assets as part of an overall retirment plan.
Rather, it's about maintaining and keeping homes', medical care, food, repairs; and all the issues that roll-up to suport the AGING-IN-PLACE philosophy.
Indeed, seniors come to the table fearful and skeptical; and great care is required to educate them and drill - down to the ultimate benefit and impact a reverse mortgae can have. Transparency must be the central feature of this process.
This openess (disclosures) along with the counseling requirement is the central feature which seperates reverse mortgages from traditional forward mortgages.
That is why, while seniors are a vulnerable class of Americans, it's reckless to equate SUB-PRIME with reverse mortgages. This type of suggestion that they are both cut from the same cloth ignores the facts and history surrounding these two products.
So, is a reverse mortgage good or bad?

Bernie Ockrim of IL 2:37PM October 05, 2009

Let's see a comparison from MBA about the Reverse Mortgage loan for seniors vs the Option ARM loan that is still being sold to many seniors.
Hundreds of seniors took an Option ARM loan in the past and homes were forclosed because they could not make the smallest payment allowed, etc. The Reverse Mortgage loan did save some seniors from foreclosure but very few. Due to the declining values of property vs amount owed, there was little that could be done.
Maybe the Banking Industry needs to look into counseling on other loan products offered by the Banking Industry to seniors. The Option ARM loan and others are still offered today to the senior community with no counseling requiements.

Derry Hampton of CA 1:27PM October 05, 2009