Lenders Preying on Unsuspecting Seniors !

Senior Finances - Reverse Mortgage

Predatory lending practices that produced the subprime mortgage meltdown have cropped up in the reverse mortgage market, where seniors are being targeted, putting their equity and savings at risk, according to a new report.

Reverse mortgage lenders are using financial incentives to reward brokers for deals that boost lenders’ profits and raise borrowers’ costs in much the same way subprime mortgage lenders did, notes the report released by the National Consumer Law Center.

“Some seniors have been persuaded to sink proceeds from reverse mortgages into complicated annuity contracts or expensive long-term care insurance products that generate large commissions for sellers” but hurt seniors, the report states.

Reverse mortgages are used by seniors to tap home equity while remaining in their homes. Last year, more than 10,000 seniors used reverse mortgages to access more than $17 billion in home equity, and 2009 appears to be on pace to be a record year for reverse mortgage volume, according to the report.

While reverse mortgages can be a benefit to some consumers, “they also have some of the same characteristics as the riskiest types of subprime mortgages, and that should set off alarm bells,” the report states.

Click here to read the full article on the Chicago Sun-Times.