Are reverse mortgages a scam? People have heard from friends, relatives and some financial pundits that the reverse mortgage is a rip off and can harm people. I have made a video with the top three reasons people may be afraid of reverse mortgages.
The truth is the reverse mortgage was a bad loan for a long time. The fear that some people have is very real and even though a reverse mortgage may possibly greatly improve their everyday quality of life, they will not entertain the idea.
Various forms of the reverse mortgage have been around since the early 1960’s. It got to the point that government intervention had to happen to protect senior citizens from the reverse mortgage. In 1988 President Reagan signed the reverse mortgage into law and government oversight began. From that time forward, the loan protections improved and periodic guideline changes have been implemented from time to time to further improve the reverse mortgage.
In 2016 major changes were made to the government insured HECM reverse mortgage, or home equity conversion mortgage loan as it is also known, to increase borrower protections but many people are not aware of these changes but there is still resistance and few people understand the reverse mortgage.
Even with these positive changes, people still remember the reverse mortgage problems from the past and with people getting ready to retire or who have already retired, the reverse mortgage does not get considered as a pre-retirement or post-retirement financial planning option due to past bad press.
Today’s reverse mortgage is different than in the past and does deserve a second look. The loan has been around since the 1960’s and the question are reverse mortgages a scam could have applied. It wasn’t until 1988 when President Ronald Reagan placed the reverse mortgage under the FHA umbrella, which meant the loan was now under government supervision, did the tag, is the reverse mortgage a scam, start to get peeled off and since then it has gone through several meaningful guideline revisions with each one adding protective guidelines. Many people remember the 1960’s version of the reverse mortgage and may not be aware of the positive changes that have been implemented.
Below is a video that demonstrates the recent changes that have taken place on the HECM reverse mortgage. The top three issues that I have found from speaking to prospective borrowers caused are also covered in the video.
Here’s the link to watch the video and feel free to let me know your scenario below or if you have any questions or concerns, I’m here to help.
Regards,
KW