CFPB: Ads for reverse mortgages can mislead
By: The Associated Press June 5, 2015 – NY Daily Record –
WASHINGTON — We’ve seen the TV ad pitches from celebrities like “The Fonz” Henry Winkler and actor and ex-senator Fred Thompson, touting the benefits of reverse mortgages for older homeowners.
Now U.S. regulators are warning: Don’t be fooled. Many ads don’t tell the whole story about reverse mortgages.
The Consumer Financial Protection Bureau said Thursday that a study it conducted with older homeowners found they were given the false impression by the ads that reverse mortgages are a government benefit and ensure consumers can stay in their homes for the rest of their lives.
The agency said people should be aware of the risks of reverse mortgages, which are loans for homeowners 62 or older that must be repaid with interest and can deplete seniors’ funds.
Seniors taking out reverse mortgages can even lose their homes. About 10 percent of borrowers end up defaulting on their reverse mortgages, according to the agency — roughly double the rate of conventional home mortgages.
A reverse mortgage allows borrowers to receive cash or a line of credit tapping the accumulated equity in their homes. Seniors often take out the loans to help pay off credit card bills or remodel their kitchen. The loan isn’t paid down in monthly installments. The loan balance increases and comes due when the borrower dies, moves or sells the home, or defaults on other obligations such as insurance or taxes.
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