Are Reverse Mortgages Helpful, Hazardous; or are They Purely Government Condoned and Sponsored, Fraud,Scams,Theft?

 Ask Yourself, Why would anyone, in their RIGHT MIND, not suffering from THE final stages of DEMENTIA use money from a "REVERSE MORTGAGE" to pay of an already existing one? Really, could ANYTHING possibly be more ridiculous-first, you sell off all your equity; then give away all the proceeds?

Photo is, of course, PUBLIC DOMAIN

If you follow any finance sites along with big news sites, then you probably have heard of the reverse mortgage.  While you may have heard of it, do you know what it is or how it works?  The one thing I am sure you have guessed is that it deals with real estate.

Normally you will go to a bank for the purchase of a home.  You then make monthly payments against the borrowed amount over the term of the loan.  During this time, the amount owed decreases until the loan is repaid. This is a standard, regular, MORTGAGE.

A standard Reverse Mortgage, sometimes called a Life Time Mortgage, essentially reverses this transaction.  You receive (rather than pay) monthly payments from your Reverse Mortgage lender???(where is the lending, can you tell ME?) and the amount owed goes up (rather than down) over the term of the loan. You are giving up, rather than increasing, your equity; and therefore ownership of the property.

In both settings your home is the loan collateral and cash payments are exchanged between the borrower and the bank.  In the first example the borrower is making payments over time to acquire the home while with the Reverse Mortgage the borrower is liquidating the home over time.

In its most simplified form, a Reverse Mortgage is a mirror image or ‘reverse’ transaction.

The reverse mortgage is presently growing in popularity with our ever increasing senior population and there are many organisations trying to educate (or at least brain wash, or bull shit, and "cash in") everyone on how this kind of senior abuse and theft works.

More than ever before, senior consumers; many of whom grew old believing that after spending a lifetime in helping Canada grow, and prosper, once reaching their "Golden Years"they would start receiving some well earned and paid for well earned, Social security;so would, there after, be immune to ALL financial worry so have minimal other resources), are vulnerable to the relentless bombarding media hype and mostly USBS that promises them "TRUE,DREAMED OF" financial security; with reverse mortgages. Former Senator, and wanna be actor, Fred Thompson brazenly assures these seniors," reverse mortgages are based on a concept, put in place by President Regan, twenty five, 25, years ago".

Actually, the history of reverse mortgages depends on; where you do your research and, who you Want to believe.

The generally (most often) agreed upon origins and histories of reverse mortgages show a loan product that has evolved dramatically over the last 40 ,50 or 60, years.
According to United States of the Americas official records, the first reverse mortgage loan was written in 1961( by Nelson Haynes of Deering Savings & Loan (Portland, ME) to Nellie Young, the widow of his high school football coach helping her to stay in her home despite the loss of her husband's income. 
How can, or do, they then explain the fact that my maternal grandparents, living in Edmonton, Alberta, Canada, became victims of government endorsed and sponsored reverse mortgage scam before 1960(approx. 1957.
According to present BS /hype, the need for reverse mortgages was further “developed “ (United States of the Americas) in the 1970’s with several “private banks” offering reverse-mortgage-style loans—EQITY SELL OUTS.These programs gave seniors money from their home; but, of course, did not afford the promised-seldom provided-protections of today as no FHA “insurance”??? had been put in place.

In the early 1980’s the United States of the Americas, Senate, Special Committee on Ageing, issued a report stating the need for “a standardised reverse mortgage program”. Other committees throughout the mid 80’s cited the need for FHA insurance and uniform lending practises. In late 1987 their Congress passed the FHA insurance bill that would insure reverse mortgages. What are they insuring?

On February 5, 1988 United States of the Americas President Ronald Reagan signed the FHA Reverse Mortgage bill into law. In 1989 the first FHA-insured HECM was made to Marjorie Mason of Fairway, Kansas by the James B Nutter Co.

Since 1989, due to relentless “Call Now” brain washing, and massive media advertisements, reverse mortgages, have grown in popularity, especially in the mid to late 1990’s. Despite economic upheaval and forward mortgage lending issues; promoted as “safe”—there is no mention of for who or what is insured-- reverse mortgages have continued to grow, as a “government insured program” (assuming that any democratic government; which is, supposedly, by the people for the people” and has no money of its own can “insure” anything) allowing seniors to access a portion of their equity in their homes while never making a payment.

Here we come up against the first group of“catches”—the first of many. Equity is NOT ownership. A mortgage is and always has been considered financial credit (a loan}, equity being the required collateral. A reverse mortgage relinquishes equity and therefore any and all claim of ownership.

THEY will always be defined by the roles they played. Robert Wagner is the suave star of “It Takes a Thief” and “Hart to Hart.” Patrick Duffy will be forever be J. R.’s younger brother on “Dallas” (except to those who remember him as the piscine star of “Man From Atlantis”).Sally Field is “The Flying Nun” and “Norma Rae.” And Henry Winkler--He’s the Fonz. Aaaagh!

But time marches on, and these ageing, mostly “flash in the pan” actors-- even the politicians--are among a growing group of “celebrities “??? embracing new roles pitching junk, carny style, “For Free” products to ageing baby boomers. 
They made their mark personifying youthful vigour in Highly Promoted “blockbuster”-or something, hits; now they are starring in TV and YouTube infomercials promising to help other seniors overcome the "debilitating" challenges of old age. Instead of whispering sweet nothings into the ears of lovely co-stars, they are urging other seniors to “call now” or sometime within the next hundred years or so, for "free" DVD advertising, about hearing aids, reverse mortgages, gold coins, and drugs and medications for bone loss and joint pain, and prostrate problems.

Second group of Catches:

Under a controversial policy that is drawing national scrutiny and at least one major lawsuit--but then citizens of the United States of the Americans file law suits against everything, and anything, whenever they get a chance, and on a regular basis-- HUD, the agency that runs the reverse mortgage program, insists that when a spouse dies, and the surviving spouse’s name is not on the loan documents,(traditionally the wife's signature seldom was, the husband was considered "Lord of the Manor") the full mortgage balance becomes due and payable. Of course the lender? also determines how much interest has accrued on the loan?; if a relative or the surviving spouse cannot purchase the house and pay off the debt, the loan may be subject to a foreclosure sale.
Grandmother Darby remained in their home, which had been fully paid for at the time the reverse mortgage was taken out for several years after grandfather Darby died. but, eventually she decided to move into a nursing home; because she (now in her nineties) was having some difficulty in standing on a 1x4 while weeding her vegetable garden.The 60s, and 70s, were periods of rapid real estate appreciation, rather than depreciation. The property had increased in value, probably, 8 to 10 times; any way you attempt to read it; the appreciation, in property value, greatly outweighed any amount borrowed??? Of course, the lenders, according to GOVERNMENT ESTABLISHED POLICY??? were and are still; allowed to chalk this increase in property value up to THEIR newly gained, equity in the property. They were and are also allowed to SHARK interest rates on the, so called, loan??? Predictably, and, as long for seen by benevolent Government Insured lenders???most of the "survivors"live on "fixed" incomes and do not have the funds available to pay off this HIGHLY MANIPULATED, so called, DEBT.
Long term facilities/nursing/seniors homes take one third of an HONEST seniors pension and/ or declared (many immigrants, and refugees, have foreign, numbered, bank accounts)which of course, they never, never, declare. 
However, notably these people are often able to do a great deal of world travelling.
There were 582,000 loans outstanding nationwide as of November 2011, according to the Consumer Financial Protection Bureau, which issued a critical evaluation of the program last year.

Very predictably, reverse mortgages are restricted to seniors 62 years or older. They are allowed to “TAP INTO EQUITY” and to “PULL OUT MONEY” for use in their retirement years. “This money may even be used to pay off the existing mortgage”??? As long as they pay their property taxes and hazard insurance, generally they don’t have to repay any of the money until they move out,(this includes going into a nursing home, and/or long term hospitalisation, DIE, or, sell the house.

In the United States of the Americas, (not unusual),HUD’s scamming policy on surviving spouses has been challenged in a federal lawsuit filed by AARP, the so called, seniors advocacy group.

On behalf of two widows, and one widower, threatened with foreclosure, AARP charged that HUD disregarded clear statutory language (assuming that anything written in “American” ENGLISH is clear or indisputable)that allows surviving spouses to remain in their homes even if their name is not on the documents.
In an appellate court ruling last month, United States of the Americas Circuit Judge Laurence H. Silberman said that the COURT- was “somewhat puzzled” as to how HUD can justify a regulation (obviously illegal, while a bureaucratic office is empowered to ENFORCE LAWS and REGULATIONS, they are not elected government and are NOT empowered to implement them) that seems contrary to the GOVERNING STATUTE.”

Of course, HUD did not have, and could not have, any legitimate comment on that ruling, which sent the case back to a lower court, and refused to discuss Ogle’s pending foreclosure. So did Ogle’s loan servicer, Reverse Mortgage Solutions, of Spring, Texas, which initiated the foreclosure action. Fannie Mae said the foreclosure would have to proceed because the mortgage is FHA-insured and that agency’s rules effectively require it, given the absence of Ogle’s name on the documents.

Just like any other product being marketed, lenders target a specific demographic and then use a celebrity status and influence??? to persuade consumers that a reverse mortgage is a safe, government-insured way to access the equity in their home, that the money is tax-free and can be used for paying off credit card debt, medical bills or any purpose, and that obtaining one will propel the consumer into the lifestyle they fantasise about and deserve… the retirement of their dreams.

I view them, primarily, as scams, but, anyway you view it, a reverse mortgage is a complex financial instrument with lifelong consequences and should therefore never be entered into without first obtaining competent advice from independent financial and legal professionals.

To Catch Groups Three and Four, we go

NEVER, never, remove one spouse from the title; they become a non-borrowing spouse, and lose all rights to the property and in the loan.  The non-borrowing spouse never “gets their name on title automatically” (or any other way) at some later time.  Warning: Thousands and thousands of non-borrowing spouses have lost their homes to foreclosure and auction and become dependent on social service programs or family members for living and care at the end of life. Of course, in Canada, ANYONE existing in an OLD AGE SECURITY PENSION is automatically considered to be on long term Social Service/Welfare any way; but taking out a reverse can and does dictate HOW MUCH OF A PENSION you receive.

The ONLY reason anyone should obtain a reverse mortgage should be if it is part of the consumer’s overall financial strategy, meets their financial goals and provides financial security through retirement – and even then, it should happen ONLY after all other options (such as selling or leasing the home, possibly refinancing it with a traditional mortgage, obtaining a line of credit, or collateral loan) have all been thoroughly examined; so the consumer can determine the best financial option for their circumstances.

Catch Groups Number Five, or so. HO, HO.

All options should be reviewed with the guidance of financial and legal advisers who, completely understand the consequences of a reverse mortgage for the specific consumer circumstances and, the advisers must have no relationship whatever to the mortgage company.

This is the only way one can be absolutely certain a reverse mortgage is suitable for a particular consumer and not the mortgage company.

Keep in mind:

The HUD “Certified” Counsellor is neither qualified, nor legally, permitted, to give financial, or legal advice, both of which are vitally needed for this product. The same goes for the Lender, who can only provide information regarding the Reverse Mortgage products they sell but not the vital advice needed to determine suitability.

The most important thing for anyone considering a reverse mortgage: be 100 percent sure, 100 percent positive that this transaction is in the best interest of the borrower. There is no turning back and no recovery once the borrower’s signature is on the dotted line.

The bad, the Ugly, THE REALITY:

A reverse mortgage is restricted to seniors 62 years or older.  It is an ‘owner-occupied’ loan; meaning; the borrower (virtual SELLER) must occupy the home, they cannot rent it out, and they cannot, ever require long term (it is not specified  just how long hospitalisation must be before HUD defines or attempts to define it as “long term) care outside the home, because leaving the home long enough for long-term treatment or care triggers an automatic default

·         The consumer pays a large mortgage insurance premium up front in the origination fees.

·         The consumer then makes on going monthly mortgage insurance payments which will be added to the loan balance.

·         Mortgage insurance protects the lender, not the borrower. It insures the lender they will recover 100% of their costs, fees, interest, etch. when the loan is due and payable.

·         So, though we are told it’s a ‘government insured loan’, the cost of that insurance is borne by the consumer but the consumer derives no benefit from it whatever (very similar to “life” insurance).

·       Seniors (the targeted “pigeons”) are especially vulnerable. They could lose their property or, at the very least, all equity/ownership in,or of, their property, and therefore the very ‘quality of life’ they were hoping for in the first place – all at a time in their lives when they are least able to recover from a catastrophic financial event.

A gentle admonition to trusting seniors:

 Seniors should be told that no matter how much they like or trust their salesperson, that person will not be servicing the loan. The Loan Servicer cares about one thing,-and one thing only- – PROFIT.

What consumers can do to protect themselves BEFORE-NEVER AFTER, signing a reverse mortgage:

·         Make an appointment with a competent financial adviser who can help determine if a reverse mortgage is the best financial tool for their particular circumstances.

·         Obtain a complete copy of the final loan documents a minimum of a week in advance to allow ample time to go through them with a fine-tooth comb.

·         Have an attorney and/or financial adviser who is proficient in reverse mortgages examine the loan documents in advance of the closing and review all the facts and figures before ever getting near the closing table.

If a consumer decides to sign a reverse mortgage:

Consumers should tell the salesperson they will require an executed, dated copy of each and every page of the contract at closing. If the salesperson arrives without that copy, the borrower should insist on a postponement until the salesperson can return with the required paperwork. Then, of course, the borrower should not allow the salesperson leave without turning over that complete copy.

If a consumer realises he or she has made a bad decision:

There really is no help once the contract is signed, even if the borrower realises it was not a good decision. It’s a contract. That’s it. The borrower/seller is bound by it and the lender(con man-scam artist)is not some ‘nice guy’ who can be counted on to help the borrower out or be sympathetic. The best advice anyone can give at this point to minimise the financial damage would be to pay it off as soon as possible. However, the borrower needs to know he or she will lose the upfront fees and loan origination costs, which can run into thousands of dollars.

Litigation will likely not be an option, remember, even though it is you that will pay for it , this transaction is “GOVERNMENT” Insured and the Governments are North Americas most prolific Criminal, Law Breakers:

According to any, and all, available, stats, not one consumer has ever been made whole in a reverse mortgage case in civil court – the few who have actually prevailed in court received only a pittance in comparison to what they lost. Borrowers should never deceive themselves into imagining the lender will ‘go gentle into that good night.’ Further, in regards to senior citizens, since elderly borrowers might not survive years of litigation or might not clearly remember everything leading up to and including the execution of the mortgage, most attorneys would likely advise potential litigants that the cons far outweigh the pros, and it is therefore not worth the time or the financial risk. On top of all that, these lenders have millions of dollars at their disposal to pay for lawyers, something most borrowers probably do not have.
For these reasons and more, the best recourse is be certain a reverse mortgage is a suitable and the best financial tool for your personal circumstances.©Al (Alex, Alexander) D. Girvan. All rights reserved.