Corporate & Securities Law

Attorneys at SNSFE are investigating the suitability of reverse mortgages for senior investors.  FINRA, the Financial Industry Regulatory Authority has issued an Investor Alert urging homeowners over the age of 60 to carefully weigh all of their options before tapping into their home equity through reverse mortgages to obtain additional income for their retirement years:

A reverse mortgage is an interest-bearing loan secured by the equity in a home and can be helpful to homeowners having trouble meeting expenses.  The FINRA Alert cautions homeowners that these loans - which are being aggressively marketed as an easy, cost-free way for retirees to finance lifestyles or to pay for risky investments - can jeoparize their financial futures.

The new Investor Alert, "Reverse Mortgages:  Avoiding a Reversal of Fortune," explains how these loans, often called "rising debt" loans, allow borrowers to convert their home equity to cash to be used for any purpose.  The Alert advises homeowners considering these types of loans to use the funds wisely.  The Alert goes on to warn investors that if they are approached by a financial professional to do a reverse mortgage in order to fund a particular investment, they should keep in mind that all investments carry risks and costs - and the higher the promised return, the higher the risk.  And, in some cases, those who sell the mortgages may profit from the sale of the proposed investment, giving them twice the incentive to talk someone into a loan they may not need.

"Reverse mortgages are an extremely costly way to fund an investment," said FINRA CEO Mary Schapiro.  "Homeowners need to consider all the risks and explore all of their options before taking out a loan that may prematurely deplete their home equity, which is often a homeowner's most valuable asset and most precious source of retirement security."

The Alert explains that reverse mortgages were originally designed as a tool for aging, low-income homeowners to keep their homes.  Now, as more and more Americans are retiring and sitting on large pools of home equity, they are beginning to use reverse mortgages as a way to finance a more extravagant retirement lifestyle than they could otherwise afford.  The Alert reminds homeowners reverse mortgages should generally be a last resort and offers tips to anyone considering these types of loans.

Source:  FINRA News Release

Anyone with information regarding reverse mortgage abuses are urged to contact attorneys at SNSFE.