The worst of the predators: Going after the elderly

Reverse mortgages have become a booming business. They allow elderly homeowners — usually those 60 or older — to gain access to the hundreds of thousands of dollars tied up in their homes. The best thing? The loans are paid back after the elderly owner dies, by selling that person’s home.

Seems like a safe way for senior citizens to help fund their retirement years, right. Well, according to a story written by Charles Duhigg for the New York Times, reverse mortgages aren’t always the saviors their providers promote them as.

You can read Duhigg’s story here. The story highlights the plight of one senior homeowner who did take out a reverse mortgage. Unfortunately, her salesperson pressured her into placing the proceeds of the loan into complicated investment vehicles that put her money largely out of reach to her. After borrowing more than $200,000,  the homeowner received just $33,000 in cash.

Elder-care experts quoted in the New York Times say that this example is far from an isolated case. A host of scam artists, they say, are getting into the reverse-mortgage business. The reason? The mortgages are complicated. It’s hard for homeowners to understand exactly what they’re signing up for. That’s a perfect recipe for a scammer.

Expect to hear more about this issue. The reverse-mortgage business is  big one. According to the New York Times story, it’s a $20-billion-a-year industry. The story said that more than 132,000 elderly homeowners took out a reverse mortgage in 2007.

The homeowners who have sued the providers of these products say that salespeople pressured or tricked them into taking out loans with unfairly high fees. Others complain that salespeople pressured them into putting the proceeds of their reverse mortgages into risky investment vehicles that never paid off.

Now, no one, of course, forced these homeowners into doing any of this. Homeowners do have to take their part of the blame. But any mortgage loan is a complicated product. Most people don’t quite understand how they work. This means it’s easy for unscrupulous loan officers — and most loan officers, by the way, aren’t scam artists. They’re hard-working, smart individuals. But there are bad apples in the bunch, as in any industry — to pressure them into loans that are too expensive, pocketing commission checks along the way.

These scam artists, by the way, are the lowest of the low. Preying on the elderly, most of whom are living on a fixed income, is pretty sleazy. Hopefully, homeowners of all kind will hesitate before signing onto any product that sounds too good to be true.