Reverse mortgages are a beneficial tool for seniors who wish to convert home equity into cash for living expenses or long term care. In fact, according to the National Reverse Mortgage Lenders Association, this income-generating strategy has become increasingly popular, with lenders issuing more than 107,000 federally insured reverse mortgages in fiscal year 2007, up from 13,000 in 2002.
However, as reverse mortgages have become more common, so has the potential for abuse. According to the Senate Special Committee on Aging, financial advisors may be persuading seniors to use their reverse mortgage proceeds to buy unsuitable annuities. ?? 1/2 Some salesmen are convincing seniors to swallow this double dose of bad financial advice,?? 1/2 says Sen. Herbert Kohl, D-Wis.
Prescott Cole, a lawyer for the Coalition to End Elder Financial Abuse, said, ?? 1/2 It is always inappropriate to use proceeds from home equity to fund deferred annuities. Funds from reverse mortgages are very expensive due to loan fees and insurance requirements.?? 1/2