USA Today blasts reverse mortgages, industry fights back | 2019-06-17

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USA Today blasts reverse mortgages, industry fights back | 2019-06-17
USA Today blasts reverse mortgages industry fights back



Last week, USA Today released a scathing investigative story that took aim at reverse mortgages, blasting lenders for targeting impoverished, elderly homeowners and leading a substantial number of them into foreclosure.

Then, the publication’s Editorial Board followed up with an op-ed that called reverse mortgages a “platform for predatory lending” and questioned whether the government should be enabling these loans.

(Laughably, the authors also describe HECM lending as “the flourishing business of reverse mortgages.” One has to wonder if they did any research on the current regulations and endorsement volume, or if they were perhaps more interested in using the colorful stories of a few defaulted borrowers who failed to fulfill the loan’s obligations to paint a picture that fit into their narrative.)

Unsurprisingly, the National Reverse Mortgage Lenders Association fought back, publishing its own op-ed in USA Today and calling out the crucial errors in the publication’s research and explanation of the loan.  

For starters, the USA Today story roasted the loan for its high foreclosure rate, but failed to acknowledge that a foreclosure often represents the natural conclusion of the loan, as the lender sends the property though the foreclosure process if the borrower passes away and the heirs forgo the option to repay the loan and retain the property.

While the article has been updated and now reflects this fact, the original version misrepresented the nature of reverse mortgage foreclosures, and some could argue that the damage has been done.

“An important point USA Today overlooks is that a foreclosure is often the natural resolution of a reverse mortgage after the borrower passes away. Few result in actual displacement,” wrote NRMLA President Peter Bell in the op-ed, published Sunday. “If the balance due exceeds the home’s value, or there is no next of kin to handle a sale, the estate will simply allow the home to go into foreclosure.”

The investigative piece also told the story of a widow of a reverse mortgage borrower who was evicted after her husband passed away because she failed to file the proper paperwork. The article briefly touches the fact that rules have changed, but does not elaborate on guidelines have been put into place to protect the non-borrowing spouses of borrowers who pass away.

In fact, one of the key problems with the article is that it discusses old issues with the HECM program that have since been resolved through regulations that were put into play in 2014 and 2017. But the article barely mentions that guidelines have changed, leaving readers to conclude that these are still major problems with reverse mortgages.

Bell stresses this fact and notes that reverse mortgages are now considered to be a financial planning tool for retirees.

“The program has evolved over the years, with stronger counseling requirements, enhanced consumer protections, limitations on loan amounts, and nonborrowing spouse provisions,” Bell points out. “Today, reverse mortgages are an important retirement planning tool.”

Bell writes that lenders never want a loan to default and will continue working with regulators and counselors to educate all parties involved so that this doesn’t happen.

“A reverse mortgage loan can be a lifesaver, particularly for those in need of cash with few options, as there are no monthly payments and nominal income requirements,” he states.

Reverse mortgages can help older borrowers pay for daily expenses or medical bills, Bell writes, but the owner must pay their taxes. As with all loans, there are obligations that must be fulfilled. 



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