On the 20th anniversary of the law establishing the reverse mortgage program, reverse mortgages are getting a closer look thanks to a Senate hearing and a new report by the AARP. The AARP's Public Policy Institute released a report on homeowners' attitudes and satisfaction with reverse mortgages. The report finds that while consumers' opinions of reverse mortgages are generally favorable, high costs are a big deterrent to purchasing a reverse mortgage. The AARP released the report at a Senate Special Committee on Aging hearing on the rapid growth of reverse mortgages.
The AARP surveyed homeowners who had taken out loans and homeowners who had decided against loans in addition to surveying the general public on their awareness of reverse mortgages. The report found that, in general, reverse mortgage borrowers have a favorable opinion of their loans. Ninety-three percent of borrowers said their reverse mortgages had a positive effect on their lives, and 58 percent of borrowers indicated that the loan had completely met their needs. According to the report, the biggest reason for not purchasing a reverse mortgage is the high cost.
The AARP report also highlighted a problem with some reverse mortgage companies, which is overly aggressive marketing. According to the report, lenders offered 9 percent of borrowers additional financial products, such as annuities and long-term care insurance, which may not be good investment choices given the high cost of the mortgages. In addition, the Senate panel also heard testimony from advocates for the elderly who warned that unscrupulous sales agents sometimes promote reverse mortgages in order to generate funding to purchase products like annuities, as well as testimony from family members of those harmed by reverse mortgage brokers.
The AARP report concludes with recommendations to make reverse mortgages a more mainstream option for homeowners, including recommendations for reducing costs, upgrading consumer counseling and information, and improving the marketing practices of lenders.
To read the report, click here.
For more information on reverse mortgages, click here
For an article about the Senate hearing, click here.