Reverse mortgage Truth Lending disclosure

The Truth in Lending Act

The Consumer Financial Protection Bureau is planning stronger disclosure requirements for reverse mortgages as more evidence emerges that senior citizens are using the product without fully understanding its main features and risks.

As part of a Dodd-Frank Act requirement, the agency was set to release a study Thursday showing signs reverse mortgages are not being used as intended, with increasingly younger borrowers taking out larger pots of money rather than gradual income streams to help finance their later years.

"Though many older Americans are aware of reverse mortgages, they struggle greatly to understand this complicated product and the tradeoffs involved, " CFPB Director Richard Cordray said Wednesday in a conference call with reporters. "They may focus primarily on the amount of money they can garner in the short term, and underestimate the long-term costs and risks."

The bureau, which is required to study the reverse mortgage sector and identify potential consumer protection concerns, found that 73% of borrowers last year accessed nearly all or almost all of their home equity available in the reverse mortgage — an increase of 30 percentage points since 2008 — leaving few funds available later in life.

Nearly half of borrowers were younger than 70, and taking out a loan at the earliest eligibility (typically age 62) has become more common. The study found the biggest players in reverse mortgages currently are nonbanks, and the sector is "increasingly dominated by small originators." The two largest providers, Wells Fargo and Bank of America, left the market last year and MetLife left it in April.

"With their departure, the market has become much more heavily dependent on mortgage brokers and small correspondent lenders, " the study said.

Cordray said borrowers who use up all of their home equity earlier may lack the resources later on to pay off taxes and insurance related to their home. "The reverse mortgage product can provide some peace of mind not afforded by other types of loans, " he said. "Notably, however, the borrower still remains responsible for paying property taxes and homeowner's insurance which can cause real problems, including loss of the home if plans are not in place to continue meeting those obligations each year."


Less sanctimonious take on EU crisis

2011-07-07 15:04:36 by Tek_Jansen

Spain has received most of the attention, thanks to its ten-million strong turnout – reportedly half the entire labor force. Holding its first general strike since 2002, Spanish labor protested against its socialist government using the bank crisis (stemming from bad real estate loans and negative mortgage equity, not high labor costs) as an opportunity to change the laws to enable companies and government bodies to fire workers at will, and to scale back their pensions and public social spending in order to pay the banks more. Portugal is doing the same, and it looks like Ireland will follow suit – all this in the countries whose banks have been the most irresponsible lenders

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