They're at it again! Did anyone see the report done by KABC news in which Ric Romero does a segment with an 83 year old borrower and totally misses the whole point?  And to make matters worse, they use Consumer Reports as their expert investigative source, a source that is decidedly against reverse mortgages and hardly a source likely to give a fair and balanced review about the product.  After being a mortgage banker for 34 years, I do believe in telling the whole story but the story told by ABC news just leaves too much out.

We tell every borrower that a reverse mortgage is not for everyone. The loans are not inexpensive and are meant to be the last loan a borrower will ever need. The key to knowing if a reverse mortgage is for you is bringing your family and trusted financial advisors into the decision making process.  HUD requires that every borrower attend a mandatory third-party counseling session so that they can ask questions and be educated by an independent counselor, but only the borrower and their families can determine if the loan is the right thing for them.  No counselor or lender can make that determination.

In the KABC story, the daughter of the borrowers states that her parents got their reverse mortgage 4 years ago and that it was the worst decision they ever made, that the property could not be sold for the balance that was now owed on the loan.  What an educated reporter would have found out had he not been looking for the sensationalism of the story was whether or not the borrowers had an existing mortgage at the time they took out their reverse mortgage and whether or not they were falling behind on those payments. 

We don’t know if the reverse mortgage saved the borrowers from foreclosure and losing the home at that time.  We always encourage the participation of the family in this decision. The daughter of the borrower never states whether she was involved in the decision to obtain a reverse mortgage and if not, why not.  Again, it either escaped the reporter or he just decided it would detract from the sensationalism of his story.

As for the statement about the home not being worth the balance of the mortgage, with the loans that have been written for many seniors and others who could not afford higher payments or who could not verify adequate income to qualify for the standard 30 fixed rate mortgages over the past several years, many borrowers and seniors especially had to turn to option arms which were negatively amortizing instruments or interest only over these years. 

We receive an average of 3 calls a day from senior borrowers whose homes are also over-encumbered due to falling property values, some with option ARM’s and some with regular fixed rate loans.  To imply that this is just a phenomenon of the reverse mortgage is plain wrong.  There are an abundance of over-encumbered houses at the present and many believe that the trend may continue for some time. 

The borrower in the story lived in her home for 4 years without having to make a mortgage payment on the reverse mortgage.  That tells me one of three things: either she saved on the payments she did not have to make as a result of her reverse mortgage or she received a substantial amount of cash or a combination of the two.  Yet, Mr. Romero barely mentions that the borrower’s daughter believes that the mortgage broker steered her parents into a poor investment and therefore the borrower has seen little of the money. 

We don’t know if the investment was a substantial sum or a minimal amount after paying off a mortgage.  At this point, we don’t know why the borrower must leave her home (could be for health reasons but we can’t say and the report does not – but with the reverse mortgage the fact that the home value is up-side down would not force her to move); we don’t know if by saying that the borrower has seen little of the funds that means that they are still there but frozen as in a long term investment, are gone as in the investment is now worthless or if that was really just a minor portion of the mortgage itself; or what. 

But the bottom line is that once again, the facts about reverse mortgages are being misreported. 

The reverse mortgage is not what is making this borrower leave her home. She could stay there until she passed regardless of property values but apparently there are other factors which necessitate her making a move. The reverse mortgage did not make the borrowers put money into an investment which is now either no longer available to them or still tied up (we still don’t know). Lenders belonging to the National Reverse Mortgage Lenders Association (NRMLA) must follow a code of ethics which outlines how and under what circumstances participating NRMLA members may offer other products. 

So as part of the educational process, borrowers and family members should look for companies who are members of NRMLA (in additional, at All Reverse Mortgage, we offer no additional programs so we can sell borrowers no other products to invest their funds).  And this is a big consideration, in almost every incident that I have seen where there was a reported “problem”. 

It was almost always due to the fact that someone found a way to help the senior borrowers part with their money.  Mr. Romero’s reporting is so sketchy I cannot tell if this is a big concern or if the investment was a minor part of the mortgage proceeds, but again, it happened.

This is as egregious as the borrower who called me yesterday from a past reverse mortgage that we did on her home in Riverside, CA.  The loan paid off her then existing mortgage which she could no longer afford and gave her a small amount of cash as well.  The borrower called me in a panic yesterday because a real estate agent had been to her home and told her that the values had dropped so substantially in the Riverside area, that she would soon be encumbered to her homes value on her reverse mortgage and then the lender was going to call her loan due and payable. 

The agent told her that she would then be kicked out of her home – that she better consider listing or getting a loan modification quickly! Like Mr. Romero, this agent obviously knew nothing about reverse mortgages and this poor single borrower was beside herself with fear because she knew the values in her neighborhood had dropped substantially and she feared she would soon be homeless. This simply is not true and I gave the borrower numbers for NRMLA, HUD and AARP so that she could contact each one of them directly as well to hear the straight scoop. 

Reverse mortgages are not an inexpensive proposition and we always advise borrowers to talk to their family members and their trusted financial advisors.  We do not push a borrower into any loan and even tell them that if it’s not the right decision for their circumstances, we advise them not to do it.  But to take a single borrower, not give all the information regarding the details of the transaction or what they did with their proceeds and then blame value drops on the reverse mortgage is just plain wrong! 

I would encourage Ric Romero to interview the reverse mortgage recipient we just closed whose home we saved with a reverse mortgage just two days ago who was less than 24 hours away from foreclosure sale (that’s right, the sale was to be held on the courthouse steps at 10:30AM of August 19th and we closed her loan on August 18th in just 8 calendar days). 

Ms. Norton is one of the happiest borrowers now that her home of 40+ years is saved and would have been lost in just 24 short hours.  We have hundreds of borrowers with their own stories who have had their lives enriched by their reverse mortgages.  What do you say Ric?  It might not be as "juicy", but it’s a lot more honest and it’s a lot more fair to let people see the truth!