US Senator Claire McCaskill has filed legislation aimed at
curbing what she claims are “predatory lending” tactics practised
in the reverse mortgage market. Her proposed legislation, the
Reverse Mortgage Proceeds Protection Act, would, she said, help
protect seniors by ensuring they receive independent counselling
prior to signing up for a reverse mortgage and requiring that the
Department of Housing and Urban Development (HUD) issue stronger
consumer protection regulations.
Reverse mortgages, termed equity release in countries such as
the UK, enable homeowners to convert some of the equity in their
home into cash while retaining ownership. According to the Sate of
New York Banking Department, to qualify for some for some reverse
mortgage loans customers must be at least 60 years old while for
others they must be at least 70.
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“For some people, a reverse mortgage provides a solution to the
financial difficulties faced by those with diminishing retirement
funds by allowing them to stay in their home while using their
equity to cover other essential expenses,” said McCaskill. “But for
others, a reverse mortgage has the potential to significantly
worsen their financial situation, especially if it is paired with
unsuitable annuities and other unneeded financial products.”
McCaskill’s proposed legislation would require the HUD to implement
regulations to help ensure that seniors are not pressured or misled
into purchasing unnecessary or unsuitable financial products, such
as annuities, life insurance or long-term care insurance. “Several
states have already begun establishing regulations to crack down on
these practices,” said McCaskill.
