It never ceases to amaze me the when the Housing and Banking Committees of our Congress get involved to “help us” live better lives that it always seems to become a potential disaster.

Laws that are designed to “protect the public” are ill equipped mainly due to the fact that we have Congressional lawmakers that are not educated well enough in these financial areas and , to top it off

are being led with advise from the Banking Industry which have everything to gain from swaying information to favor themselves, in my humble opinion.

Witnessing several lovely but clueless seniors in the predicament of losing their homes to foreclosure , even though Fred Thompson and Henry Winkler are saying on TV ad’s what a great way to go.

We will get back to the one common thing these seniors  had in common, a bit later in the article.

and you can never lose your home, has made me realize that banking community is alive and well at preying on the most vulnerable Americans.

Here’s what is not being said via the TV Ads:

  1. The CLOSING COSTS are very, very costly, typically about $10,000.00 and up. These costs are set by our government, not the mortgage companies. They are universal across the board.
  2. Once the Mortgage company determines how much they will loan you, you can take a monthly payment or a lump sum up to the limit they set.

And this is where the problem in lies.

The one common denominator that the seniors I met that were going into foreclosure was:

  1. They all eventually used up 100% of the amount limit so no more money was available.
  2. They all were taking money out because they had no other money left.
  3. They all had no money to PAY THE TAXES AND INSURANCE ON THEIR PROPERTY
  4. This now triggers the DEFAULT clause of the LOAN and they go into Foreclosure.

Supposedly, you would think our lawmakers would realize that a senior citizen doing a reverse mortgage is, in general:

  1. NOT financially sophisticated. They are taking their last major asset and using it for cash.
  2. Might not be as sharp as they were in their thinking when they were a younger person.
  3. Vulnerable.
  4. Want to “iron clad” protect our senior population.

The Banking Industry are saying to themselves:

  1.  We have our Senior Citizens with PAID OFF Homes.
  2. We loan them money on their only major asset left since they are low on funds.
  3. We make it a potentially complicated loan instrument with a lot of fine print that they might not understand.
  4. We default and take the property from them.

Remember, this is my opinion, of how I see it, but after 23 years of financial experience in the investment and real estate markets, I have seen enough to know this is bad.

Best solution for a Senior in this position?

  1. Sell your property, downsize or move in with your children fi that is an option.
  2. Put your money in a low risk instrument and collect interest.

It is a harder choice, as Reverse Mortgage has that allure of not moving or changing your life, but in reality you are just “kicked the can down the road” and might have to move anyway.