I’ve discussed in Retirement Watch some situations in which a reverse mortgage can be a good financial tool. But there are other situations in which reverse mortgages aren’t appropriate. A recent settlement reported in the Boston Globe describes one of those cases. A couple was urged to take out a reverse mortgage and use the proceeds to invest in annuities and investments. The mortgage, annuities, and investments all had high fees and commissions that more than eroded any financial benefits from the transactions.
There’s been a growing momentum among some financial advisers to market reverse mortgages to people with more financial means as part of an overall retirement strategy.
But the growth of reverse mortgages has been marred by deceptive practices, scams, and foreclosures. In December, the Consumer Financial Protection Bureau took action against three companies for deceptive advertising, claiming the groups falsely said homeowners could not lose their properties while they have reverse mortgages. Lenders can foreclose if owners don’t pay their property charges or maintain their properties.
In California last month, a woman was sentenced to a year in prison for allegedly stealing $117,000 from a 74-year-old man as part of a reverse mortgage scam.