Tuesday, June 30, 2009
GAO critiques HUD on oversight of reverse mortgages, HECM's
Some seniors are left vulnerable to abusive lending practices associated with reverse mortgages, according to a Government Accountability Office report on the Department of Housing and Urban Development.
Reverse mortgages allow seniors to borrow against their home equity and pay nothing as long as they live in their homes. Their heirs have to pay the mortgages back.
Salesmen for loan companies often try to cross-sell other insurance products inappropriate for particular seniors. Cross-selling is a major strategy of all major financial institutions, who place heavy pressures on their agents and advisers to do so. Mergers within financial services over the past fifteen years (before the Crash) greatly increased the appeal of cross-selling, which sometimes became a career focus for many executives.
The Washington Post story is by Dina El Boghdady, titled “Reverse Mortgages Leave Seniors at Risk, GAO Says: HUD Defends Programs' Safeguards”, link here.
The actual GAO report is called “Reverse Mortgages: Product Complexity and Consumer Protection Issues Underscore Need for Improved Controls over Counseling for Borrowers”, dated June 29, 2009, and the link is here.
The HUD page for reverse mortgages is here. The page says, “The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage or HECM, and is only available through an FHA approved lender.”