Making Sense of Reverse Mortgages Information you need to make a good decision!

August 4, 2010

Yellow Flags in Reverse Mortgages

Filed under: Uncategorized — Scott Larson @ 2:17 pm

In the mortgage industry we are always looking for “red flags,” items that might indicate fraud or misrepresentation.  But in an article yesterday in National Mortgage Professional, Dr.Barbara Stucki  of the National Council on Aging talks about a new counseling protocol that includes

a series of questions relating to risk factors that may not be considered a normal part of the discussion in taking out a loan. For example, is the person living alone? Have they had a recent fall? Do they live in a house with stairs or other barriers?

By themselves, each of these issues may not be a risk, but they can add up. For example, seniors who live alone may have few other resources so they may be overly dependent on a reverse mortgage. If they are also in poor health and their financial needs exceed their expectations, they may soon find themselves unable to fulfill their borrower obligations, such as paying property taxes, homeowners’ insurance and home maintenance. These types of risks, which we call “yellow flags,” are important and should be added to the overall assessment of a person’s needs and goals.

These help to address the “appropriateness” issue that I have talked about for so long.  The counseling provides a score that helps to indicate where more attention needs to be paid to the other details of the transaction to make sure that a reverse mortgage is a long term solution for the senior.

To read the whole article, click here.

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