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Changing World of Reverse Mortgages

Last update on: Mar 16 2020

Not all the news is good. There was a booming supply of non-insured reverse mortgages. The non-insured loans tended to carry lower fees than insured loans. Several of the firms fueling that growth have disappeared, including Countrywide Financial and IndyMac. The reduction in this market means homeowners have fewer options when they want loans above the FHA limit. The good news from this change is at least some of the non-insured loans were generated by high pressure sales tactics that put people into inappropriate loans. That source of pressure is gone.

In recent years, there apparently have been new uses of reverse mortgages. The loans were taken at younger ages to pay for vacations, buy televisions or other furnishings, buy nicer cars, or even make gifts to children or grandchildren. Wealthier homeowners were using the loans to help purchase second homes or even make investments. In some cases, lenders that also sold financial products convinced people to take out reverse mortgages to buy life insurance, annuities, and other products.

Do not take a reverse mortgages unless you likely will be in the home for several years at least. The fees are high and not worth paying for only a short time. It would be cheaper to sell your home a few years early or try another source of cash.

RW August 2009.

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