mortgages remain popular at home and in the Canadian market as well – but that hasn’t diminished a fundamental misunderstanding on how it works.
“Consumer complaints tell us that the complex terms of reverse mortgages
continue to be misunderstood,” Consumer Financial Protection Bureau Director Richard Cordray, told MPA
. “As more baby boomers choose reverse mortgages to tap into their home equity
, they need to understand the unique terms and features of this product. Our advisory can help those who have already chosen reverse mortgages to plan ahead for loved ones.”
One market in particular – California – has shown a marked upswing in reverse mortgages.
The trends driving the increase in reverse mortgages include the aging demographic of North America’s population. Longer life expectancies and insufficient retirement savings – couple with a strengthening housing market that is driving up home prices – are making reverse mortgages a viable option.
According to a recent CFPB report, the most frequent complaint of the more than 1,200 reverse mortgage
complaints involves consumers who are confused about the requirements and terms of reverse mortgages. Many are frustrated when they are unable to refinance their loans because there is insufficient remaining equity in their homes.
The CFPB reported these complaints suggest that some homeowners may not understand that the loan proceeds as well as the accrued interest on the loan overtime will substantially decrease the amount of available equity.
But those complaints may be misleading.
While reverse mortgages are only available to people over the age of 62, only about 42% of the complaints were from consumers who described themselves as 62 or older. The remaining consumers likely included the younger spouses or family members of borrowers, according to the CFPB.