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SUITABILITY IS THE SOLE RESPONSIBILITY OF THE CONSUMER
The Government defines a Reverse Mortgage as a “COMPLEX FINANCIAL
TRANSACTION” in the “Important Notice” (a required disclosure).
If you understand this IS the definition and follow the instructions and information
in the “Important Notice” this is what will happen: You would get competent
professional, independent legal/financial and/or tax advice to understand the
binding legal documents, the important financial and legal implications, the terms
and their (lifelong) effect will impact you and your estate. With help you can
make a conscious and informed decision on the suitability of a reverse mortgage
to meet your needs, goals and provide financial security.
Below is the link to the Important Notice in my parents loan application.
There is only ONE REASON/PURPOSE to get a reverse mortgage: For use as
part of your financial strategy, to meet your financial goals (long term), and
provide financial security through your retirement.
If a reverse mortgage does not meet this purpose do not get it.
TIP: Explore all your homeowner options before making a decision:
Lease you Home
Sell your Home
Refinance your current mortgage
Get a Line of Credit
Family Loan/Peer to Peer Loan
Rent a portion of your Home
Once you explore all your options choose the one that makes the best financial
sense for your situation. Be open to making the best decision for your financial
1. The Lender's role is to provide you information and education about
reverse mortgage products they sell, the amount of funds you can get from your
equity, funding options - lump sum, monthly income, line of credit or a
combination of these options. They educate and guide you on the reverse
mortgage process. The lender does not give you any advice and is not qualified
to give you any advice. The Lender has no responsibility or fiduciary duty to the
2. The HUD Counselor's role is education and information on the reverse
mortgage process. The counselor's use of the new Financial Interview Tool (FIT)
gives the borrower the illusion they are receiving the necessary financial and
legal advice because the counselor ask you financial and legal questions such as
income, expenses, assets. They tell you alternatives to a reverse mortgage such
as refinance, sell, line of credit. BUT legally the HUD Counselor cannot give any
advice (including financial and legal). The HUD Counselor has no responsibility
or fiduciary duty to the Borrower.
There are fundamental differences between a traditional forward mortgage and a
reverse mortgage, a few are:
The risk to the senior is life altering. You risk losing your property, equity,
retirement, quality of life and everything you worked for all your life - at the time in
life you can least afford to make a financially devastating mistake and are least
able to recover. GET A SECOND OPINION FROM A QUALIFIED FINANCIAL
ADVISOR OR INDEPENDENT REVERSE MORTGAGE SUITABILITY ADVISOR.
That way your decision will be based on the facts, consequences, costs and
benefits for your circumstances.
GET EVERYTHING IN WRITING FROM THE LENDER. Verbal promises are made
all the time to induce you to sign the deal. Verbal promises may violate State or
Federal law and you will have no recourse on a verbal statement.
Most of us have seen ads that claim reverse mortgages are FHA insured making
them safe for the consumer. Actually, the borrower pays a huge mortgage
insurance premium that protects the lender and ensures they will recover 100%
of the loan, fees and costs. In fact, if the sale of your home isn't enough to repay
the loan, interest and costs the Lender will submit the loan to FHA for the
balance. The Lender is never at risk.
The reverse mortgage industry has received billions in taxpayer subsidies.
Example: $700,000,000 in FY 09 and $800,000,000 in FY 10 - that is 1.5 billion
in taxpayer subsidies in two years to provide full repayment of reverse mortgage
loans to the lender. These are loans already defaulted, foreclosed and property
sold that have left seniors homeless, helpless, on public assistance if they are
not deceased. In 2013 the FHA reverse mortgage insurance fund is 2.8 billion in
the red. FHA took a 1.7 billion dollar bailout from Treasury in the fall of
Are you aware there are "17 Triggers" that cause default and foreclosure?
There have been approximately 775,000 reverse mortgages sold. In an HUD
audit report in 2011 there were an astonishing 49,000 reverse mortgages in
default for one of those "Triggers" nonpayment of taxes, insurance. Every one of
those borrower's signed a disclosure and acknowledged they would pay their
taxes and insurance but without the consumer understanding they alone are
responsible to determine suitability of this loan for their circumstances - approx.
10% are in default just for non-payment of taxes and insurance.
Until all reverse mortgages are sold with the involvement of a Professional
Financial and/or Legal Advisor this problem will continue to mount with no help for
vulnerable senior victims and the taxpayer on the hook to bail out the lenders.
Of course there is absolutely no motivation to determine the suitability or
consequences to the borrower. The Reverse Mortgage Industry spends millions
of dollars lobbying against any regulation. They spend millions more fighting
everyone who dares to file a lawsuit. The Lender and NRMLA will slander and
blame the borrower and family members who dare to speak out against them.
Having said all of this - I am not against Reverse Mortgages. I advocate
for the borrower's best interest first. A reverse mortgage sold to
Seniors who understand the long term consequences and costs, have
the Advice of a Legal & Financial Professionals are able to make a
conscious informed choice about the suitability of the product for their