Consumer advocates are once again calling for stricter oversight of the reverse mortgage business, with one declaring the product should only be used as a last resort.
The senior staff attorney for Consumers Union, Norma Garcia, said the product is very risky and should be used only by those seniors who have no other alternatives to supplement their income.
Consumers Union issued a report along with the California Advocates for Nursing Reform and the Council on Aging Silicon Valley, which calls for stronger oversight of reverse mortgages by the Consumer Financial Protection Bureau because the advocates say current practices are lacking in a number of areas.
Those problem areas are: misleading marketing claims; cross-promotion of other unsuitable financial products and foreclosures related to defaults caused by failure of the borrower to pay either property taxes or homeowners insurance premiums.
The report also points out that reverse mortgages taken over by the Federal Housing Administration have increased from $81 million in 2004 to $381 million in 2008.
Among the reforms called for are: ensuring loan suitability; fiduciary duty; outlawing deceptive marketing; stronger prohibitions on product cross-promotion; strengthening the quality and content of counseling; and protections for the non-borrowing spouses and tenants.