Reverse Mortgages, Deliberate attempt to further disenfranchise?

[Protagoras]

Been seeing these commercials for a while and it's really starting to seem deliberate...not just as a business tactic but as a socioeconomic tactic.

We are seeing massive looting by the neocons in all aspects of our society sure. But we're also seeing something else imho, the deliberate dismantling of the middle class. The desire to destroy this segment of society seems planned and deliberate (as many threads before have discussed).

So after the absurd tax cuts and union underminings and removal of basic health and education systems that help maintain the middle class...then erosion of middle class jobs through outsourcing...and then the protection of VAST amounts of wealth through changes in inheritance etc...

I get a flashback to a discussion I heard on AAR the other day regarding how white americans still have a substantially higher asset than minorities...PRIMARILY DUE TO HOME OWNERSHIP.

And then Poof! I start seeing James Garner pimping this new GREAT THING FOR THE ELDERLY...Reverse Mortgages...let us buy chunks of your house back so you can pay those bills or go on vacation!

And it all seems to fall into place...piece by piece. Knock down social security, destroy medicare, make perscription drugs insanely high priced...then go after the fixed income market with a crowbar telling them that the only way to keep up is to liquidate that last asset they have traditionally held onto for future generations.

And yes I know that the elderly have had lose their homes, been screwed on multiple health and welfare levels before...but we're talking about a whole new level...one that literally re-re distributes a massively significant level of the Middle Class economic platform.

Poor people already didn't have a house to pass on. Rich people have no damn reason to worry about reversing anything anyway.

Who does that leave? Is it just another cheap and exploitive attempt by some mortgage companies to make some money? Sure. But I can't help but think there is also something more calculating about it...I don't believe the A-Z assault on the middle class is anything less than intentional.

[serryjw]

1. I agree with all your observations

but I'm not sure if RM's are not the only answer for some. Elderly, more woman than men, want to stay in their lifelong home/neighborhood until they die. They are living on SS and a small pension, maybe. They couldn't get and apt that they could afford. IF I was 75 living on under a $1000 monthly and I had an asset worth $300,000; I may do the same.

[Sammy Pepys]

2. A lot of these gimmicks have come out of...

..the huge real estate boom. Lots of folks just can't afford the traditional, 20% down/30 year mortgage...though it's the best way to finance a home.

The reason reverse mortgages are pitched to the elderly is because they're the only ones who normally qualify for them.

[monarch]

3. It's a big moneymake for financial institutions too.

I'm trying to help an older relative avoid going that route because it is so expensive, and not because I'm an heir, I'm not.

I also know somebody who outlived her reverse mortgage and I'm not sure how she existed after that was gone. She would have been better off moving into assisted living when she could still afford it and when she could have benefited from having somebody look after her needs. She just got more and more depressed living alone at home.

[central scrutinizer]

4. If the elderly don't have good health insurance..

they will lose their house to the hospital when they can't pay their bill. That is the real "death tax" that should be addressed not the Paris Hilton Protection Act.

[SidDithers]

5. I don't see this as a nefarious scheme...

It's the same as buying an annuity, except you use your house as the principal, and you still get to live in it.

If you don't have kids, or aren't worried about passing your assets on to another generation, why note get value for it?

Sid

[OPERATIONMINDCRIME]

6. Firstly, Reverse Mortgages Have Been Around For Years.

Secondly, I haven't found any news article that says mortgage companies are holding guns to people's heads forcing them to sign reverse mortgage documents.

Lastly, the only people that qualify for reverse mortgages are the elderly. No one else can get them, and that's they way it's always been with them for years. Many elderly think this is a very good program.

[BootinUp]

7. Just like any financial decision

People need to look at their options. Isn't a reverse mortgage essentially like selling the house via a long term arrangement? If someone needs the cash from a house and wants to continue living there it might be a viable choice.

[Coyote_Bandit]

8. These are the financial vehicle of the future, IMHO

Why?

Because many folks invest more in their home than in savings or other more traditional forms of investment. Think McMansion. And many folks tend to buy as much house as they can - irrespective of their actual needs. In doing so, they invest more assets into housing and real estate than necessary. If they want or need to liquidate some of that investment (for healthcare, to send little Johnny to college, for retirement, etc.) they can take a second or third mortgage - or they can do a reverse mortgage. A reverse mortgage can be structured different ways. Someone could take a single lump sum - and more later. Someone else might take regular equal monthly installments. In any event the homeowner gets to remain in the home without having to trade down to liquidate a portion of the investment. The finance company gets the fees and interest and has the security of the property. What this does not do is retain savings and wealth within the family unit through any form of inheritance. The bad thing about reverse mortgages is that the folks who use them are being nickel and dimed to death. They are losing their investment bit by bit and many do not realize the extent of their loss.

[flamin lib]

9. Reverse mortgages are designed to recover the assets in home

equity for elderly people who need assistance beyond current income. Just recently the program has been expanded to allow for a line of credit. Previously the home had to be "sold" to a lender who would, over time, buy the entire property. Line of Credit loans allow for approval of a loan up to the equity in the property. The homeowner can then use as much or as little as necessary to make ends meet.

When the homeowner/borrower dies the estate assumes the burden of debt.

It is a tool for retirement planing and like all such tools should be discussed with a financial planning specialist.

[Phoebe Loosinhouse]

10. Some reverse mortgages can be good for some people, but I agree w/your

Specifically, those older people who want to remain in their house and are not deriving enough income from pensions, SS, etc. but they have a lot of equity in their home. I think it absolutely makes sense for someone like that to draw down some of their equity without having to worry about paying it back. But, these programs can be quite expensive in terms of fees and costs that are built into the reverse mortgage and one really needs to figure out a cost benefit. It's possible for some, that they might be better off just selling and downsizing to an affordable apartment, assuming they could find one. I read a real horror story the other day about some form of reverse mort age available a number of years ago that involved some kind of "equity sharing" arrangement with the bank. They really screwed some little old lady out of her equity appreciation for what had been a relatively small loan. There are supposed to be more mortgages like that out there just waiting to let the heirs in for a big old surprise.

But, back to your larger point - I do think there might be something weird going on with housing in general. As you point out, it is one of the last bastions of middle class wealth. I was and am still freaked out by the Supreme Court deciding that is was possible for states to transfer the private land assets of one person to another private person - a complete perversion of eminent domain in my opinion. Supposedly this can be addressed at the state level to save the concept of American private ownership. I would check on my state and make sure that something is being done in the statehouse. If they won't move on it, get rid of them and get in a batch who will get it done.

Secondly, I have heard about a concept of housing hedge funds being created for the largest real estate markets in the country. This is along the ENRON philosophy that anything can be a commodity. So, if you live in one of these markets, I think you could see housing values subject to the same wild swings as an electrical grid if people with really big bucks get in and just try to game the system to their own advantage. Oops! There goes the housing market! Oops! there goes all your accumulated wealth you poor little wage slave. Guess you will have to leave the old homestead and take up residence in a refrigerator box under the highway.

Thirdly, anyone with one half of one third of a brain could predict that zero down mortgages with variable rates or even better 120% loan to value home loans are a recipe for disaster. You know that, I know that, the American people know that, so why doesn't the banking industry or the Fannie Mae or Freddie Mac know that?

Speaking of Fannie and Freddie, no, I have to stop myself at this point because I am getting ill.

But anyway, if the desired goal is to destroy the American middle class and drive down wages and per capita wealth, everything is going along swimmingly for the neo-cons and the New World Order Oligarchical crowd. For the rest of us, I say buy futures in Alpo and save all the really large good boxes.

[Protagoras]

11. I'm not saying that this tool is brand new or

that some need for it can't be rationalized. Being a home owner myself I've got a clue how it works. What strikes me as particularly disturbing is the push I'm suddenly seeing for it with the implications for wealth re-distribution. Obviously we've created a system where many elderly people are forced to liquidate in order to survive. There's lots of aspects to that. But reverse mortgages seem like the most well greased way we may now have for literally evaporating gererational wealth transmission among the middle class.

That's the observation. And I think if we really reflect on the implications of it (along with the issues that push people toward it) it sure starts to look like part of a well engineered cliff designed for the middle segment of our society to run over.

I'm not talking about anecdotal examples...not your grandmother or my father or whathave you. I'm talking about a whole class of society and the impact that the promotion of this type of system will have on it.

Seems like a macro level view of this is rather chilling. Of course the whole damn thing is now a house of cards and a strong wind is blowing.