WASHINGTON, D.C. – The U.S. Senate Special Committee on Aging held a hearing today to examine the rapid growth of reverse mortgages and hear from those most affected by the expanding industry: seniors.  With the senior population soaring as baby boomers reach retirement age, the committee looked specifically at ways to ensure consumers are protected as they consider this type of loan. 

 

“Seniors who have worked their entire lives to be able to enjoy retirement should not be victimized by people out to make a buck,” said U.S. Senator Claire McCaskill, who chaired the committee hearing. “We need to have adequate protections in place to ensure only those who would benefit from a reverse mortgage qualify.  Without this, reverse mortgages could hurt as many seniors as they help.”

 

The hearing, which included the testimony from the U.S. Department of Housing and Urban Development (HUD), AARP, professionals in the reverse mortgage industry, and family members of those negatively impacted by reverse mortgages, marked the twentieth anniversary of the Federal Home Equity Conversion Mortgage (HECM), a HUD program that allows people over the age of 62 to transfer equity on their home into monthly income.    

 

 Seniors have long been prime targets for predatory lending, including within the reverse mortgage industry where selling this type of loan is often a lucrative business.  Seniors often have considerable equity in their homes, but for many, their house represents their only asset of real value.  Because seniors often have so few financial resources beyond their home equity, it’s especially important that strong consumer protections exist to keep seniors from falling prey to aggressive marketing and predatory tactics that could leave them penniless.  

 

For some people, a reverse mortgage provides a solution to the financial difficulties faced by those with diminishing retirement funds by allowing them to stay in their home while using their equity to cover other essential expenses, such as prescription drugs.  But for others, a reverse mortgage has the potential to significantly worsen their financial situation, especially if it is paired with unsuitable annuities and other unneeded financial products.

 

The hearing on Wednesday offered committee members the opportunity to hear feedback from those who know the reverse mortgage industry best, in an attempt to find ways to ensure that those who would not benefit from this type of loan don’t find themselves trapped in a reverse mortgage.

 

McCaskill said today that she plans to introduce legislation in the coming weeks to address concerns raised at the hearing.