Predatory Reverse Mortgage Scams Beginning To Surface?

The Miami Herald reports:

• With the housing market in decline, unscrupulous sales agents are popping up in the booming reverse mortgage industry, where reports of deceptive and high-pressure sales tactics are worrying lawmakers and consumer advocates alike. [...] Peter Bell, president of the National Reverse Mortgage Loan Association, said he doesn't believe the problem is widespread. But he conceded that sales agents left jobless by the housing crisis are migrating to the reverse mortgage industry and may "have a different type of mentality about moving transactions through quickly.''

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• In [U.S. Congressional] committee testimony, [...], Prescott Cole, a lawyer from San Francisco, said some sales agents seeking larger commissions are wrongly advising seniors to buy tax-deferred annuities with their loan proceeds. [...] In one case, a 92-year-old man put $650,000 in a deferred annuity and died two years later, Cole said. But because the annuity didn't mature until 2063, the dead man's family had to pay a $150,000 fee to break the contract and access the money, said Cole, who works on behalf of the national Coalition to End Elder Financial Abuse.

• ''Long-term annuities are almost always inappropriate for seniors, as they can tie up retirement savings far beyond one's life expectancy,'' said Sen. Herb Kohl, D-Wis.

• The nation's largest provider of reverse mortgages, Financial Freedom Senior Funding Corp. of Irvine, Calif., is at the center of the controversy because of several lawsuits that allege borrowers were steered into inappropriate loans and annuities by sales agents and insurance brokers working in concert.

For more, see Seniors at risk from predatory lenders (As the popularity of reverse mortgages for seniors grows, the industry is proving fertile ground for predatory lenders, loan agents and brokers who see older, cash-strapped borrowers as easy pickings) (if link expired, try here or try here).

Go here for stories related to Reverse Mortgage Problems.

See also, Be wary of tapping into reverse mortgages (North Country Times):

• "We are seeing an increase in sales agents who have perfected the technique of selling annuities by playing on the seniors' fears of going into nursing homes or outliving their assets," said Prescott Coles, a spokesman for the coalition, as he testified before the committee.

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