The panel will discuss these important issues at noon on October 7 at Lancelotta’s, 1113 Charles Street, North Providence where a light luncheon will be served.

Click here for more information or call Cindy Christopher at 401-487-1004 by September 30.

Jewish Community Center of RI
401 Elmgrove Ave., Providence, RI
Call 401/331-1244 to reserve your place
Click here for more details.

A reverse mortgage allows homeowners 62 or older to convert the equity in their home to a flexible cash advance that does not have to be repaid until the homeowner moves, sells, or dies. Almost all reverse mortgages are made under the Home Equity Conversion Mortgage (HECM) program, which is administered by the Department of Housing and Urban Development (HUD). In the first quarter of 2009, HUD backed about $7.8 billion worth of reverse mortgages, the largest amount in any quarter since the agency launched the program in 1988, the Washington Post reports.

While reverse mortgages look like no-lose propositions at first glance, they are complex products that have significant downsides for some. For example, these loans carry large insurance and origination costs, they may affect eligibility for government benefits like Medicaid, and they are not ideal for parents whose major objective is to safeguard an inheritance for their children.

GAO reviewed marketing materials used by reverse mortgage lenders and found some claims that were “potentially misleading because they were inaccurate, incomplete, or employed questionable sales tactics.”

GAO also found evidence that potentially unsuitable financial products like annuities are being sold in conjunction with reverse mortgages. The Housing and Economic Recovery Act of 2008 is intended to restrict this inappropriate cross-selling, but HUD is still in the early stages of developing regulations.

To help seniors make informed decisions about whether to obtain a reverse mortgage, Congress requires prospective borrowers to obtain adequate counseling by an independent third party. As part of its investigation, the GAO employees went undercover to receive such counseling. While the GAO found that the counselors generally conveyed accurate and useful information, none of the counselors covered all of the topics required by HUD and in nearly half the sessions the counselors did not discuss required information about alternatives to reverse mortgages.

The GAO concludes that these issues pose “emerging consumer protection risks” for reverse mortgage borrowers and the agency makes a number of recommendations to improve consumer protections.

To read the GAO report, “Reverse Mortgages: Product Complexity and Consumer Protection Issues Underscore Need for Improved Controls over Counseling for Borrowers,” click here.

For the Washington Post article “Reverse Mortgages Leave Seniors at Risk, GAO Says,” click here.