BLOG VIEW: Unless you or a family member belongs to the AARP, you missed the March edition of the organization's Bulletin newspaper. Within that edition was an astonishing slam against the reverse-mortgage sector written by Jane Bryant Quinn, a syndicated commentator specializing in personal finance issues.
Under the headline ‘'Tax-Free' and Other Catnip,’ Quinn uses her full-page Bulletin piece to slash the concept of reverse mortgages. She provocatively claims that the product was first conceived as loan of ‘last resort’ (it wasn't, and Quinn does not cite the source of her quote), and then she bashes reverse mortgage television advertisements featuring Robert Wagner and Fred Thompson, whom she cattily dismisses as ‘celebrities.’
Quinn spends a lot of time in her AARP screed questioning a claim from one of the television advertisements on whether reverse mortgages are ‘safe.’ As evidence to the contrary, she writes: ‘You can keep the house only as long as you can pay your property taxes and homeowners insurance. If you run out of money and let these bills slide, you're in default, and the bank can foreclose on your house.’
She adds that 8% of reverse mortgages – approximately 46,000 loans – are in default. Of course, that also means that 92% of reverse mortgages are not in default and that homeowners with these loans are cognizant of their responsibilities under the terms of the transaction.
Quinn's AARP column conveniently forgets to mention that reverse mortgages require extensive borrower counseling before any document is signed and money is transferred. Quinn does not seem to realize that you can't just walk into a bank and waltz out minutes later with a reverse mortgage.
Quinn also tells potential reverse-mortgage applicants that they ‘might have to show that you'll still be able to pay your bills when the reverse mortgage money runs out. If the banks turn you down, consider it a timely warning. To avoid eventual foreclosure, sell your home now, grab whatever home equity you still have and make other living arrangements.’
Okay, let's get this straight: If a bank (for whatever reason) decides not to issue a reverse mortgage, the rejected applicant should immediately dump their residence in a market that is already burdened with a surplus glut of houses for sale and then just immediately ‘make other living arrangements’? Uh huh. Did somebody at AARP slip in a parody article from The Onion into their Bulletin as a joke?
If that's not bad enough, the Quinn piece is illustrated with a surreal drawing of a couple imprisoned within a house-shaped cage that is hanging from a string, like an old-fashioned birdcage. Beneath that jolting picture is a caption that says, ‘These 'safe' loans can lead you straight to foreclosure in your later years.’
So why is the AARP on an anti-reverse-mortgage kick? Well, Quinn doesn't answer that until 10 paragraphs into her piece, when she briefly acknowledges that the AARP filed a lawsuit against the U.S. Department of Housing and Urban Development (HUD) regarding a policy that requires spouses who are not on the reverse mortgage to repay the loan if they want to keep the property.
Admittedly, the AARP has a valid point regarding HUD's policy. But Quinn never bothers to give HUD's side of the argument, which leaves the reader to wonder about the full story. In case you want to learn more about this subject, I recommend a MortgageOrb article from last fall authored by Atare E. Agbamu, creator of the ThinkReverse blog and a former director of reverse mortgages at Minneapolis-based AdvisorNet Mortgage LLC.
The reverse-mortgage sector has more than enough problems, and the very last thing it needs is to see its credibility distorted in a turbid article published by a special-interest group with an axe to grind. Clearly, the reverse-mortgage message needs to be presented with clarity and honesty – something that the AARP completely failed to do with Quinn's silly scare tactics.
We'll continue with this subject tomorrow via our Person of the Week column, which features Jeff Taylor, founding chairman of the National Reverse Mortgage Lenders Association.
– Phil Hall, editor, MortgageOrb
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