Fannie's Reverse Mortgage Interest Rate Rule Changes To Invite Fraud, "Bait & Switch" Tactics?

The Associated Press reports:

• Almost daily, the reverse mortgage industry is changing, and it’s worrying plenty of people. For years, reverse mortgages have been reliable, a way for seniors to live off the equity in their homes as they age. [...] But now, reverse mortgage veterans [...] are concerned about that some sudden changes by Fannie Mae that allow [interest rate] margins to fluctuate almost daily until the funding process is complete. These adjustments can confuse seniors and cause them to question whether they are getting fair treatment.

• Fannie Mae — the largest financier in the U.S. mortgage industry — is trying to attract more money to the reverse mortgage market by increasing the amount lenders can make on selling the loans. But raising fees and allowing rates to change can lower the amount of money senior homeowners can borrow. It also can increase the fraud risk as competition for their business increases.

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• Industry insiders fear that the margin increases will lead to higher instances of fraud, with lenders quoting a low margin to get clients interested, then disclosing a margin increase later in the process in a “bait-and-switch” strategy.

For more, see Changes in reverse mortgages stir fears among senior citizens.

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