Posted by & filed under Stockton Real Estate.

By Mandelman

Searching online for information about reverse mortgages, I came across article after article about how reverse mortgages somehow became a financial nightmare for different seniors around the country. I was shocked to read something like that as I’ve been researching and writing about reverse mortgages lately, and I couldn’t understand how they could possibly turn into any sort of “nightmare.”

But, imagine this, as reported in the Miami Herald on July 12, 2013…

A reverse mortgage with an interest rate of 9.95 percent… plus a clause granting the lender a 50 percent share of any increases in the value of the home, plus an additional 2 percent for something called a “maturity fee” to increase the lender’s payout even more.

And, as if those terms weren’t egregious enough, on top of that the mortgage required the borrower to purchase a $33,000 annuity that would be added to the principal balance and that would both accrue compounding interest and reduce the amount that the lender would pay out to the homeowner in the future.

Good Lord. A nightmare? I’d say so. In fact, those are about the scariest mortgage terms I’ve ever heard in my life. I couldn’t even imagine who would offer a mortgage of any kind with those sort of terms and costs. That’s not a “reverse mortgage” in my book… that’s just a predatory lending scam that, if it isn’t already illegal, certainly should be.

The point is, that description has nothing in common with the reverse mortgages offered today, at least not the reverse mortgages offered by ethical and reputable lenders. The lesson that should be learned from reading the horror story above isn’t so much about reverse mortgages, it’s more that no one should ever do business with con artists and criminals.

Of course, that’s not really “news,” right? It’s obviously always important that you only work with FHA-approved lenders with rock solid reputations for treating borrowers ethically at all times. And if you’re not sure about the lender you’re working with… simply slow down and check things out before you proceed. Reputable lenders won’t mind you wanting to check things out.

New York Times columnist, Jessica Silver-Greenberg, has also done some outstanding work related to the perilous nature of some reverse mortgages, and the deceptive marketing tactics used by unscrupulous firms.

“Mark S. Diamond, a former sub-prime mortgage …read more

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