The next big real estate boondoggle
It’s been real quiet – too quiet in fact – on the shady real estate lending front.
The collapse of the subprime industry may explain some of it. Still, you have to wonder what happened to all those aggressive brokers made a killing signing home buyers onto high-interest rate mortgages they couldn’t afford.
After all, they didn’t go to jail. And the rare few who faced any sort of civil penalties likely brushed them off as a cost of doing business.
According to new report by the Boston-based National Consumer Law Foundation, questionable brokers and their sleazy subprime tactics have found a new home in the reverse mortgage business.
http://www.consumerlaw.org/news/PR-reverse-mortgage1009.pdf
Brokers with “perverse’’ financial incentives are aggressively selling reverse mortgages to elderly home buyers, and possibly misleading seniors in the process, the report finds.
In a reverse mortgage, homeowners 62 and older are able to tap into the equity in their homes in return for a lump sum or periodic payments. The lenders are repaid after the homeowners die and the property is sold.
One practice drawing scrutiny is claims that reserve mortgages provide “life-time income,’’ as well as the crossing selling of the loans with annuities and other products.
Take a look at the NCLF report - here’s a taste of it below.
“Many of the same players that fueled the subprime mortgage boom — ultimately with disastrous consequences—have turned their attention to the reverse market. Lenders, including some of the nation’s largest banks, view that market as a source of profits that have dried up elsewhere. Mortgage brokers see it as a new source of rich fees. Predators who once reaped profits from exotic loans have now focused on wresting more wealth from vulnerable seniors. And securitization, which allowed subprime loan originators to disassociate themselves from the downside risks of abusive lending, is becoming commonplace in the reverse mortgage industry.”
