I couldn’t read this “journalistic” (too use the term loosely) hit piece (Six Problems the Consumer Financial Protection Bureau Should Tackle First) and not respond. Below is my letter to the editor of Time Magazine requesting a retraction…
As a reverse mortgage professional I am writing about your publication’s recent story published July 6th highlighting reverse mortgages as one of the six problem areas that the new Consumer Financial Protection Bureau needs to address. After reading my comments I would ask that your publication publish a retraction or correction in fairness to your readers who deserve the truth. Unfortunately, such retractions are much like trying to pick up feathers scattered in the wind.
To begin, let me state that I am at a complete loss at the utter and complete lack of research, misleading statements and irresponsible reporting exhibited in Mr Stephen Gandel’s article.Perhaps “journalists” like Stephen Gandel might consider actually researching data that has been readily available for a program that has been in existence since 1989 (HECM program began). Where did he get his so called “facts”? It frustrates me to no end that little or no effort would be made to obtain at least rudimentary understanding of a product.
Seeing the media whip up sensationalistic and ignorant “smear” pieces is not surprising when it comes to reverse mortgages. . What is more upsetting is that irresponsible articles like this misinform the public and most importantly the seniors who read your publication who need the truth about reverse mortgages (both good and bad), not hyperbole.
Let me outline the list of inaccurate statements that should be corrected by Time in any media that this article was released in.
- The homeowner (senior) does not sell their house. They retain title, The bank is a lien holder.
- A reverse mortgage does not give the bank the right to sell the property when the borrower dies or moves out. When the borrower dies or moves out the bank gives the homeowner (or heirs) up to 12 months to repay the loan in any way they wish. They may sell the home or refinance; the choice is theirs.
- Reverse mortgages do not give the borrower the value of their home, minus the cost of the loan! The amount made available in the loan is prorated based on the age of the youngest borrower, the home’s value and the starting or expected interest rate. If your statement was true a reverse mortgage would be “upside down” within two short years.
- Reverse mortgages fees are only significantly different than traditional mortgages in the charges for upfront FHA insurance (MIP) and service set aside accounts. Did Mr Gandel bother to find out that many lender’s have waived loan origination, service fees and even are paying some or all of the upfront FHA insurance on fixed rate products?
- What evidence or statistics back up the claim that banks and brokers “often” abuse reverse mortgages. Perhaps “sometimes” would be a more fair and even-handed statement?
- Most of the time broker’s or lenders don’t have to “push seniors into taking the proceeds”…as a lump sum. It’s necessary in the majority of cases as the fixed rate product makes the most money available which is often times a must to pay off the senior’s high existing mortgage balance.
Please pass this on to Mr Gandel and I would ask that a retraction be published at your earliest convenience.
***Update*** To write your own Letter to the Editor click on the author’s name (byline)
***Update*** July 9th 2010:
Apparently Time Has posted a “correction” about the fees since it was based on an a three-year old study. How about basing the original story on a 21 year study of the basic facts of the program?