Read: Is a reverse mortgage OK for your parents?
No. 3: The largest lenders have left the market.
The exit of MetLife, Bank of America, Wells Fargo and Freedom Financial has allowed smaller lenders to enter the fray. The CPFB warns that many of these smaller lenders are "not depository institutions."
"The changing economic and regulatory landscape faced by these small originators creates new risks for consumers," wrote the CFPB in their report to Congress.
No. 4: Some spouses are kicked to the curb.
Another emerging concern regards non-borrowing spouses. Currently, some spouses are facing eviction after having been reportedly pressured to keep their name off the deed to the property, without being told that they could be left facing foreclosure when the older spouse died. The AARP Foundation litigation filed a lawsuit last year, suing HUD on behalf of clients who were non-borrowing spouses.
No. 5: Questionable marketing practices.
Aggressive marketing practices and celebrity endorsements have prompted some to call these tactics into question.
Some marketing solicitations misleadingly or deceptively pitch reverse mortgages as 'free money,' or imply that the money comes from the federal government or that the borrower could never lose their home," wrote WRNicholsLaw in a
recent blog post
. "Such deception, when coupled with a complex product that offers confusing choices, makes it hard for consumers to evaluate whether the loan fits their needs."
6 reverse mortgage tips
Here are six suggestions from AARP's Trawinksi:
- Shop around among reverse mortgage lenders
- Understand it's a loan and clarify all your obligations
- Ask the housing counselor questions if there's anything you don't understand
- Consult a lawyer or a trusted financial advisor
- Discuss with family members
- Consider other options, such as a home equity line of credit, moving or investigating programs that can assist with utility bills, food and prescription medications
"Be wary of people who are encouraging you to take out a reverse mortgage and invest the proceeds in an investment or insurance product," says Alicia H. Munnell, director of the Center for Retirement Research at Boston College. "Make sure that the house is affordable after the reverse mortgage including insurance, property taxes, and upkeep. Remember that the lender can foreclose if taxes and insurance are not paid. Once the decision is made to consume home equity through a reverse mortgage, it is much more difficult to move to another house."