A new report from the National Consumer Law Center explains in detail how “[a]buses and abusers from the subprime mortgage industry have begun showing up in the reverse mortgage market, putting at risk the equity and savings of millions of seniors.”
In the aftermath of the implosion of the subprime mortgage industry, many of the bad actors who enriched themselves in that debacle are looking for the next big opportunity. They’ve noticed the huge amount of equity that seniors have in their homes – more than twelve million seniors own their homes outright (that is, with no mortgage debt), including over seven million with annual incomes below $30,000 – and are actively scheming on how to transfer as much as possible of that equity into their own pockets.
The availability of subprime mortgages can be great boon in some cases, but they are expensive, highly complex products where opportunities for abuse abound. The situation is so worrisome that even John Dugan, the notoriously bank-friendly chief regulator of national banks, issued a strong warning earlier this year (which we blogged about here.)
Senator Claire McCaskill, who will be introducing legislation to strengthen regulation of reverse mortgages, participated in the press conference announcing the release of the NCLC report. As she put it:
We’ve seen this movie before and it didn’t have a pretty ending. Abuses in the subprime lending market almost brought down our economy. Now we’ve seeing similar abuses with reverse mortgage lending – something needs to be done before more lifesavings are depleted and more tax dollars are drained.