The latest federal budget cuts the Housing and Urban Development’s budget for reverse mortgage counseling. As a volunteer attorney for elder legal services, few things upset me more than the abusive reverse mortgage practices that have occurred over the past few years. Here is a typical predatory scenario:
- The senior learns about the reverse mortgage from someone that comes to their home or church. (One lender’s business card even says “Home and Churchs [sic].”)
- The senior is given an inflated estimate of how much the senior will receive from the reverse mortgage. The inflated estimate is based on an unrealistic value for the house. The senior believes the estimate because he or she does not understand how much home values have declined in the last few years.
- Right before closing, however, a real appraisal of the house is given. (In Detroit, that new value is often only $15-20k.) But the senior is still whisked through the closing. It is not unheard of to find a reverse mortgage where the costs associated with the reverse mortgage exceeded the actual proceeds from the reverse mortgage.
I am convinced that many of these lenders are the same people that sold the horrible predatory loans from a few years back.
In my eyes, counseling has been a way for HUD, banks, agents, and others to wipe their hands and pretend that they are protecting vulnerable seniors. In reality, most seniors that I have met with were referred by the predatory lenders to ineffective phone based counseling. Take a look at some of the websites for these supposed nonprofit and neutral phone counselors. Do they really look like they are looking out for a senior’s best interest?
Instead of recognizing and correcting this abuse (and I do consider it elder abuse), Congress has made more cuts to the only thing that may protect a vulnerable senior from these predators.
Did I mention that this topic upsets me?
Ann Carrns, Budget Deal Cuts Reverse Mortgage Counseling, N.Y. Times: Bucks Blog, April 14, 2011. A special thanks to the Wills, Trusts & Estates Blog for bringing this to my attention.
Christopher is an attorney that specializes in aging and special needs issues. He can be found at http://www.smithelderlaw.com and on Twitter @elderplanning.