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Reverse Mortgages May Be Abusive
Some homeowners have paid far more than they have received from Reverse Mortgages.
As reported in the Wall Street Journal, 10/15/98, these mortgages now are the subject of class action litigation. In less than four years, some of the homeowners wound up owing 2 to 6 times the amount of the money that they received.
The WSJ article is especially disconcerting in view of the fact that elderly customers were victimized, some of whom might not have been mentally competent.
Here are the tricks. First, lenders require the homeowner to purchase expensive annuities.
Second, up-front charges of up to 7% of home value.
Third, an abusive "contingent interest" fee, whereby the lender is entitled to pocket 50% of any rise in the home's value.
Fourth, other fees and expenses, such as origination fees, a "maturity fee" and, of course, high interest (for example, 9.75%) on monthly payments.
Before you sign up for a Reverse Mortgage, see a lawyer. And if you have one already, see a lawyer to review the terms.
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