The Consumer Financial Protection Bureau, which is required under Dodd-Frank to study the reverse mortgage sector, has found that the products "are not being used as intended, with increasingly younger borrowers taking out larger pots of money rather than gradual income streams to help finance their later years," writes American Banker's Joe Adler in his coverage of the bureau's report.
Last year 73% of reverse mortgage borrowers "accessed nearly all or almost all of their home equity available...an increase of 30 percentage points since 2008,” writes Adler. Borrower age is skewing younger too, "nearly half of borrowers were younger than 70, and taking out a loan at the earliest eligibility (typically age 62) has become more common."
"The borrower still remains responsible for paying property taxes and homeowner's insurance," says CFPB director Richard Cordray. And he warned that these borrowing trends "can cause real problems, including loss of the home if plans are not in place to continue meeting those obligations each year."
There's nothing in the works to curb existing products, but the bureau is planning to crack down on misleading advertising and use its enforcement authority to target "unfair, deceptive or abusive practices."
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