Senator Claire McCaskill warned senior citizens that reverse mortgages are often accompanied by excessive fees and marketed using overly aggressive tactics. There is currently a growing number of seniors who use reverse mortgage to help fund retirement or pay unexpected medical bills.
The Senator addressed concerns about the fast growing reverse mortgage industry in St. Louis. In fiscal year 2008 the Federal Housing Federation endorsed 112,148 reverse mortgages while as in 2001 there were only 7,757 mortgages.
According to director of the Government Accountability Office’s Financial Markets and Community Investment team, Mathew Scire, reverse mortgages are complex and costly for the vulnerable population they serve. By borrowing $100,000 you may be owing $200,000 in 10 years.
Reverse mortgages are loans available to those age 62 or older that convert home equity into cash. Different from home equity loans and second mortgage, borrowers of this type of loan do not have to repay the loans as long as they continue to “live” and maintain the home. These loans are usually insured through the Federal Housing Administration’s Home Equity Conversion Mortgage program. Because of this, reverse mortgages are costing taxpayers millions of dollars.
Because of the declining value of homes, the Department of Housing and Urban Development sought $798 million to cover potential losses in their fiscal 2010 budget request.
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