Reverse Mortgages
Baby boomer's are closing in on retirement and many haven't saved nearly enough. One bright spot for many is the home equity they've built up. Reverse mortgages are growing in popularity as a tool that let's senior homeowners tap their... [more]
Baby boomer's are closing in on retirement and many haven't saved nearly enough. One bright spot for many is the home equity they've built up. Reverse mortgages are growing in popularity as a tool that let's senior homeowners tap their home equity for living expenses. This Wiki discusses the good, the bad and the ugly sides of reverse mortgages.
GAO: HUD Needs to Improve Oversight of Reverse Mortgage Counseling
A new report from Government Accountability Office (GAO) found that the Department of Housing and Urban Development’s internal controls do not provide reasonable assurance that counseling providers are complying with HECM counseling requirements.
As part of the GAO’s examination, they participated in 15 HECM counseling sessions and found that while the counselors generally conveyed accurate and useful information, none of the counselors covered all of the topics required by HUD, and some overstated the length of the sessions in HUD records.
The report notes that while HUD has several internal controls designed to ensure that counselors convey the required information to prospective HECM borrowers, the department has not tested the effectiveness of these controls and lacks procedures to ensure that records of counseling sessions are accurate. Because of these weaknesses, some prospective borrowers may not be receiving the information necessary to make informed decisions about obtaining a HECM.
According to the Washington Post, HUD spokesman Brian Sullivan said the reverse mortgage program has more safeguards, such as required counseling, than do private home loan programs. "These existing consumer protections have contributed greatly to the success of the [reverse mortgage] program, which has provided financial security to several hundred thousand seniors," he said.
The GAO also investigated reports of misleading marketing of reverse mortgages and while there have been few reported HECM marketing complains, GAO’s limited review of selected marketing materials for reverse mortgages found some examples of claims that were potentially misleading because they were inaccurate, incomplete, or employed questionable sales tactics.
According to the report, the FTC, Federal Reserve, OCC, OTS, FDIC, and HUD all reported receiving few HECM marketing complaints from calendar year 2005 through 2008. FTC officials said they received 50 complaints related to reverse mortgage marketing in this period, out of more than 4 million complaints in their database.
In defense of HUD, HECM counseling has been extremely underfunded, but the GAO fails to mention that HUD has had limited access to funds needed to improve counseling.
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