LOS ANGELES - Even as regulators are firing shots at reverse mortgages for what they consider deceptive advertising, financial planners are taking a new look at these loans as a way to avoid selling stocks.
New research suggests the products may actually be worth a look if one can tune out the possibly shady sales tactics.
Reverse mortgages allow homeowners aged 62 and above to borrow against their home equity, and to receive either a lump sum, a series of monthly checks or a line of credit that can be tapped as needed. The debt does not have to be repaid until the borrower leaves the home by selling it, moving out or dying.
Philadelphia has proved a popular place for reverse mortgages, ranking at the top for the number of such mortgages awarded since 2011, according to an analysis of Federal Housing Administration data for The Associated Press by Reverse Market Insight, a California-based company. The city, where many families have lived in the same close-knit neighborhoods for decades, was followed by Los Angeles, Washington and Chicago in 2014.
The Consumer Financial Protection Bureau slammed industry advertising earlier this week, saying it misled people about the risks and costs of such loans. Older homeowners in the bureau's focus groups "were generally confused" by the ads, director Richard Cordray told a news conference.
The ads gave people the impression that a reverse mortgage is "a risk-free government benefit" rather than a loan with fees and compounding interest that increases the balances owed over time, he said. Reverse mortgages typically are insured by the federal government but are made and serviced by for-profit private lenders.
Cordray also took aim at ads that feature celebrity endorsers such as Henry Winkler, Robert Wagner and former U.S. Senator Fred Thompson, without mentioning them by name.
"These well-known actors, even a former senator, add a false air of credibility to the products," Cordray said.
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