Reverse Mortgages vs Forwards Mortgages ~ Governor Schwarzenegger's Signing of AB 1609 Still Helping Untold Numbers of Seniors
Part 1 In 1988, I attended a real estate meeting which included the topic of Reverse Mortgages. A broker/owner remarked, "If they could perfect those (Reverse Mortgages) a loan broker could do a lot of business."
Unfortunately, for years they were imperfect, and many unscrupulous loan brokers, using the guise of reverse mortgage "counselors" engaged in Elder Financial Abuse. There were A to Z abuses such as many who were thinking that they were signing up for a Reverse Mortgage wound up with a "Forward" Mortgage! Often the payment on the Forward Mortgage was more than their monthly income!
Simply put, a Reverse Mortgage is just that, the bank sends money to the borrower (the senior). "House rich, cash poor" seniors can receive a fixed monthly amount, a lump sum, and/or an equity line. The loan will be repaid when the senior moves out permanently or the house is sold.
Last year when Governor Schwarzenegger signed AB 1609 he added another layer of protection against Elder Financial Abuse. The signing ceremony was held at Palo Alto's Avenidas, a 35 year-strong non-profit agency serving seniors and their families/caregivers. Senate Bill 1609, authored by Senator Joe Simitian (D-Palo Alto) and coauthored by Assemblywoman Lois Walk, (D-Davis) among other things, prohibits lenders from accepting a Reverse Mortgage loan application until the senior has received third-party counseling regarding the pros and cons of a Reverse Mortgage.
AARP, a senior consumer leader in "cleaning up" both Reverse Mortgage loans and fraud can provide a list of counselors. PROJECT SENTINEL located in Sunnyvale provides such Reverse Mortgage counseling. As a HUD Certified Agency, they are regulated by and report to the Federal Government.
Part 2 on Reverse Mortgages will include excerpts of my interview with Sharleen Kilgore and Martin Eichner of PROJECT SENTINEL (Kapowich on Real Estate, consumer-protection cable series program #125).