Some Reverse-Mortgage Counselors Have Major Conflict of Interest, Forbes Says
Reverse mortgages are just plain confusing, it seems. While celebrities tout them on TV, financial experts warn us to be wary, and according to a recent report, even counselors hired to explain the things have trouble explaining them.
The kicker: Those very counselors may not be the people you want to tell you about the loans anyway, even though the law requires you to see them. Forbes.com reports on a study from the Consumer Financial Protection Bureau:
Congress requires prospective borrowers to go through counseling, but the CFPB notes that some counseling agencies only get paid if a mortgage is closed—undermining the counselors’ impartiality. In any case, the counselors have a hard time explaining the basics, according to this excerpt from the report:
Counselors unanimously reported that the concept of a home loan with a rising balance and falling equity is the most difficult concept to teach.
One of the things many people don’t understand about reverse mortgages is that if the borrower dies or moves, the spouse may be up a creek. “The non-borrower spouse must pay off the mortgage—usually by selling the home,” the article says.
We also talked about reverse-mortgage counseling here.
Leigh Ann Otte is a freelance writer who specializes in health and aging issues. She covers finding and paying for senior care for OurParents. If you have any questions about this post or need help finding senior-care options for a loved one, call 1-866-483-4896 to speak with a care advisor in your area.