Bill Aimed At Reverse Mortgages Senate Wants To Shield Elders From High Fees, Con Artists

The Senate approved a bill Friday intended to protect the elderly from con artists who charge exorbitant fees for reverse mortgages that provide cash to older homeowners.

The legislation, approved on a voice vote, is an attempt to halt “thieves, con artists, swindlers masquerading as helpers to the elderly who are really nothing more than rip-off artists,” said Sen. Alfonse D’Amato, R-N.Y., the bill’s key sponsor.

The fraud typically involves thieves who offer to help elderly people obtain a reverse mortgage and charge 10 percent of the mortgage - $5,000 on a $50,000 mortgage - for their advice, D’Amato said. They often fail to say that there will be a fee or that such advice is available free, he said.

“We’re going to slam the door on these scam artists, these loan sharks,” said Sen. Christopher Dodd, D-Conn., a co-sponsor.

Sixty percent of reverse mortgage borrowers are women living alone, and 12 percent are men living alone, mostly widows and widowers, D’Amato said, adding, “What inviting targets they are.”

The bill would require that homeowners be told of all costs for getting reverse mortgages and would authorize the secretary of the Department of Housing and Urban Development to ensure that homeowners not pay for any unnecessary or excessive costs.

Reverse mortgages, introduced by HUD in 1989, are designed to help cash-strapped elderly homeowners borrow against the equity in their homes.

Typical reverse mortgage borrowers are 76, have annual incomes of $10,400, and take out the mortgages “because they don’t want to be forced to sell their homes and leave the community,” D’Amato said.

HUD Secretary Andrew Cuomo last month barred Federal Housing Administration-approved lenders from dealing with companies that charge excessive fees to help people obtain reverse mortgages. However, a federal judge ruled that Cuomo had overstepped his authority and blocked HUD from enforcing the initiative.