At least two major life insurers have been named in a damning
report on the US reverse mortgage market undertaken by non-profit
consumer advocacy organisation the National Consumer Law Center
(NCLC).
The report Subprime Revisited: How the Rise of the Reverse Mortgage
Lending Industry Puts Older Homeowners at Risk was authored by Tara
Twomey, an NCLC attorney.
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In an overview of the report the NCLC notes: “Annual reverse
mortgage volume has topped 110,000 units and $17 billion, with top
banks like Wells Fargo and Bank of America and large insurance
companies like Genworth and MetLife leading the way. Despite a
slowdown in originations due to the recession, reverse mortgage
originations in 2009 still continue at a record pace.”
In the report Twomey wrote: “Many of the same players that fuelled
the subprime mortgage boom, ultimately with disastrous
consequences, have turned their attention to the reverse
market.
“Mortgage brokers see it as a new source of rich fees. Predators
who once reaped profits from exotic loans have now focused on
wresting more wealth from vulnerable seniors. And securitisation,
which allowed subprime loan originators to disassociate themselves
from the downside risks of abusive lending, is becoming commonplace
in the reverse mortgage industry.”
The NCLC’s report received strong backing from US Senator Claire
McCaskill as validation of the need for regulatory improvements in
the reverse mortgage market to protect seniors.
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By GlobalData“We’ve seen this movie before and it didn’t have a pretty ending,”
said McCaskill. “Abuses in the subprime lending market almost
brought down our economy. Now we’re seeing similar abuses with
reverse mortgage lending – something needs to be done before more
life savings are depleted and more tax dollars are drained.”
McCaskill is introducing new legislation to improve regulation of
reverse mortgage lending and strengthen consumer protections.
Twomey concluded: “We urgently need stronger protections for
reverse mortgage borrowers, especially a suitability standard that
obligates those who arrange and profit from reverse mortgage deals
to seek to avoid harming the financial interests of elderly
clients.”
