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The True Face of Reverse Mortgage Lenders

The Reverse Mortgage industry is regulated by the Federal Government, like any other finance-oriented industry, so the reverse mortgage lenders need to operate within the frameworks made by the law, for every reverse mortgage approved and granted. Reverse mortgage lending is run just like any other financial business, with profit motive, so lenders have to draw the line where altruism ends and business profit motive begins. 

Reverse mortgage lenders are usually cautious in their approach, and fulfill all the legal formalities before approving a reverse mortgage, like the requirement for counseling from a HUD-approved reverse mortgage counselor. Also, many reverse mortgages (a majority of them, in fact) are insured by the Government, through the HECM reverse mortgage program (Home Equity Conversion Mortgage). In this case, the component known as MIP (Mortgage Insurance Premium) becomes payable also, as a security buffer against fall in house value. 

As with any business, reverse mortgage lenders would like more people to take up reverse mortgages and pay the closing costs and origination fees. They advertise in journals and newspapers and magazines, take out TV and internet ads, and provide toll free numbers for contact, just like any other business.  

The problem occurs when someone is compelled by a lender to take up a reverse mortgage and use the money for making questionable investments. Such instances have been brought to the attention of the law makers also, which is why, the state of Minnesota is said to be considering a regulation in this aspect of its Minnesota reverse mortgages

The 'true face' of reverse mortgage lenders is the same face as painted by any other financial business – the more money coming in, the better, the more customers opting for reverse mortgage, the better. This is not necessarily wrong, as every business exists to make money to sustain itself and its owners. But when unscrupulous and questionable tactics are used to obtain more business, then it becomes objectionable by public watch dog groups and consumer rights societies.

 

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