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"Reverse mortgage" an obvious scam.

Started by Brian37, June 23, 2013, 07:35:16 AM

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Brian37

I see several companies advertising this and I do not understand other than big money paying off lawmakers to make it legal. But the double speak in it is blatantly obvious and it is intended to suck people into high interest loans. It is nothing short of legalized loan sharking.

A mortgage is a loan, so a re finance is also a loan. How the fuck they get away of implying that it is not a loan is utter bullshit. What do they think happens if they fail to pay off this "reverse mortgage"?

Legal? Yea slavery was also legal at one point. This is on par with payday loan sharking and car title loans. It preys upon the desperation of the financially distressed.
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Plu

What on earth is a "reverse mortgage"? :/

EDIT: well, aside from an obvious scam :P

SGOS

Quote from: "Plu"What on earth is a "reverse mortgage"? :/

EDIT: well, aside from an obvious scam :P
I'm not sure what ads Brian is talking about, but I'm not sure it's a scam.  I think gyp is a better word.  A lawyer presented the idea to me when we were looking at how to pay for an elderly aunt's nursing home expenses.

Here's how I understand it.  Let's say you have paid off your home mortgage, as most older folks usually do.  If your house is not paid off, or you have very little equity, I doubt you can't get a reverse mortgage because there's nothing in it for the bank.  What happens is that instead of paying off the mortgage with a monthly payment, the bank pays you a monthly payment you can use however you want, in our case, for nursing expenses.

What's happening is that the bank is now buying the house from you, and paying you a monthly payment.  But it's not as wonderful as it might sound.  It doesn't mirror all those 30 or 40 years of payments you made to buy the house.  It takes hardly any time at all, maybe two or three years, before you have zero equity in your home, and it then belongs to the bank.  Now you've got nothing.  I threw this idea out right away and looked no further.  I suppose the bank just evicts you from the home when they own it.  In the case of putting an older person in a nursing home, it won't make any difference if they are not going to live in the house.  It's just a step towards getting rid of their assets so they can qualify for Medicaid.  The bank does give you back the money that went to equity (not the interest, which made up most of your monthly payments), so it's not really a scam.  It's just like a really fast way to no longer own your home.  It reminds me of a foreclosure in the way your equity goes up in smoke, but it is legal.

However, I promised my aunt, she would die in her home.  This was something she wanted.  We managed  the issue in other ways.

Solitary

#3
A scam is a confidence game or other fraudulent scheme, esp. for making a quick profit; swindle. In what way is a reverse mortgage not a scam? The companies profiting from them are swindling money, or even a house by doing it. Solitary
There is nothing more frightful than ignorance in action.

aitm

Quote from: "SGOS"However, I promised my aunt, she would die in her home.  .


 :-k
A humans desire to live is exceeded only by their willingness to die for another. Even god cannot equal this magnificent sacrifice. No god has the right to judge them.-first tenant of the Panotheust

SGOS

Quote from: "Solitary"A scam is a confidence game or other fraudulent scheme, esp. for making a quick profit; swindle. In what way is a reverse mortgage not a scam? The companies profiting from are swindling money or even a house by doing it. Solitary
I don't think it's a swindle, because at least in my case, the bank was up front about what they were doing and how it worked.  I don't think it's a swindle when a guy offers you $1000 if you agree to give him $2000.  Those are just the terms of agreement.  It's up to you to decide if you want to enter that agreement.

Like I said, I haven't read the ads Brian did.  If there is not full disclosure in them, which was the way many banks were offering some of those scary mortgages 10 years ago, then I would call it a scam.  Of course it's possible that banks have stopped such business practices since then.  Wasn't the government going to regulate that shit?  LOL

Solitary

Quote from: "aitm"
Quote from: "SGOS"However, I promised my aunt, she would die in her home.  .


 :-k

And that is very good of you.  =D>  Just wait until the funeral homes swindle you too. It's really a shame when crooks take advantage of the good in people like yourself.  :evil:  Bill
There is nothing more frightful than ignorance in action.

Plu

So basically, you sell your house to the bank for next to nothing? Yeah, that sounds like a great idea.

Poison Tree

The TV adds I see for it claim you "continue to own your own home" when you are obviously slowly selling it to whatever company. I suspect the adds are worded very carefully so that they don't look like a scam to a jury of competent middle aged people, but also so that Grammy--who's not quite all there any more and trusts Fred Thompson for some unearthly reason--doesn't grasp the full implication of the deal.
"Observe that noses were made to wear spectacles; and so we have spectacles. Legs were visibly instituted to be breeched, and we have breeches" Voltaire�s Candide

Solitary

Quote from: "SGOS"
Quote from: "Solitary"A scam is a confidence game or other fraudulent scheme, esp. for making a quick profit; swindle. In what way is a reverse mortgage not a scam? The companies profiting from are swindling money or even a house by doing it. Solitary
I don't think it's a swindle, because at least in my case, the bank was up front about what they were doing and how it worked.  I don't think it's a swindle when a guy offers you $1000 if you agree to give him $2000.  Those are just the terms of agreement.  It's up to you to decide if you want to enter that agreement.

Like I said, I haven't read the ads Brian did.  If there is not full disclosure in them, which was the way many banks were offering some of those scary mortgages 10 years ago, then I would call it a scam.  Of course it's possible that banks have stopped such business practices since then.  Wasn't the government going to regulate that shit?  LOL

OK. There is a swindle where a salesman tells you that a certain stock is going to sky-rocket and you should invest in it for a fee. It is also sent to 1,000 people. And then he sends to another thousand people not to invest in the stock because it will fail. He publishes the results and sends it to everyone he advised. They all believe he is up front because he was accurate in his advice. So then he convinces everyone to buy stock in any company by investing all their money in it for a huge fee. He can't lose, just like the mortgage companies can't.  :-k  Solitary
There is nothing more frightful than ignorance in action.

AllPurposeAtheist

In Margie's case the reverse mortgage was great. She was elderly, the house was literally falling apart under her feet and her kids damned sure didn't deserve to get the house as they couldn't be bothered to visit ol mom so she got the reverse mortgage, received 60,000 bucks for a house she paid $8000 for 50 years ago. Yes, she could have kept the dump and lived in poverty in her last years, but she could also have enjoyed $60000 in the last 3 years of her life..  It really depends on peoples situations. Did the bank make out? Sure, but Margie had $60000 to squander.. She DID squander it, but enjoyed squandering it and she got to stay in her own home till the day of her stroke.
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SGOS

Quote from: "Plu"So basically, you sell your house to the bank for next to nothing? Yeah, that sounds like a great idea.
Well, I didn't think it was a very good idea.  The lawyer just brought it up as she was laying out various financial options.  She wasn't pushing it.  

It's a good deal for the bank.  Since they are essentially giving you money for the equity, they don't have to pay you any interest the way you paid them, and they end up with the house in pretty short order.  I've pondered the usefulness of a reverse mortgage a little bit, but I haven't come up with a scenario that makes good financial sense.  There may be one, just not that I've thought of.

I'm not sure people think much about what a killer interest rates are when they take out a mortgage.  They just decide if they can afford the monthly payments to live in a nice house.  If they can afford it, they're happy to get the loan, and everyone is OK with it.  For most people, it's the biggest thing they will ever buy, and there aren't many options besides a mortgage and the interest it requires.

Smartmarzipan

Quote from: "SGOS"
Quote from: "Plu"What on earth is a "reverse mortgage"? :/

EDIT: well, aside from an obvious scam :P
I'm not sure what ads Brian is talking about, but I'm not sure it's a scam.  I think gyp is a better word.  A lawyer presented the idea to me when we were looking at how to pay for an elderly aunt's nursing home expenses.

Here's how I understand it.  Let's say you have paid off your home mortgage, as most older folks usually do.  If your house is not paid off, or you have very little equity, I doubt you can't get a reverse mortgage because there's nothing in it for the bank.  What happens is that instead of paying off the mortgage with a monthly payment, the bank pays you a monthly payment you can use however you want, in our case, for nursing expenses.

What's happening is that the bank is now buying the house from you, and paying you a monthly payment.  But it's not as wonderful as it might sound.  It doesn't mirror all those 30 or 40 years of payments you made to buy the house.  It takes hardly any time at all, maybe two or three years, before you have zero equity in your home, and it then belongs to the bank.  Now you've got nothing.  I threw this idea out right away and looked no further.  I suppose the bank just evicts you from the home when they own it.  In the case of putting an older person in a nursing home, it won't make any difference if they are not going to live in the house.  It's just a step towards getting rid of their assets so they can qualify for Medicaid.  The bank does give you back the money that went to equity (not the interest, which made up most of your monthly payments), so it's not really a scam.  It's just like a really fast way to no longer own your home.  It reminds me of a foreclosure in the way your equity goes up in smoke, but it is legal.

However, I promised my aunt, she would die in her home.  This was something she wanted.  We managed  the issue in other ways.

Thanks for explaining it, I really have no idea what's going on when it comes to loans and bank jargon.
Legi, Intellexi, Condemnavi.

"Religion is the human response to being alive and having to die." ~Anon

Inter arma enim silent leges

SGOS

Quote from: "AllPurposeAtheist"In Margie's case the reverse mortgage was great. She was elderly, the house was literally falling apart under her feet and her kids damned sure didn't deserve to get the house as they couldn't be bothered to visit ol mom so she got the reverse mortgage, received 60,000 bucks for a house she paid $8000 for 50 years ago. Yes, she could have kept the dump and lived in poverty in her last years, but she could also have enjoyed $60000 in the last 3 years of her life..  It really depends on peoples situations. Did the bank make out? Sure, but Margie had $60000 to squander.. She DID squander it, but enjoyed squandering it and she got to stay in her own home till the day of her stroke.
That is of course the gamble.  You don't know you're going to die before you lose everything.  If Margie lived to be 100, it may not have worked out as well.  Now I have to admit, there's probably some joy in squandering money, but there's often a negative consequence for it down the road.  But you do make a case, conditional on certain assumptions that you try to predict, where a reverse mortgage makes sense.

AllPurposeAtheist

If she hadn't squandered it she could have invested in sound investments, but she'd lived dirt poor her last ten or so years and her health was horrible.
My dad owned his house in Dayton. I wish he'd gotten the RM because he let my sister live there, it caught fire, a small fire and dad unloaded the place for 10 grand, took the money and ran. He could have repaired the minor damage, gotten an easy $50000 for it and still walked away.. He didn't want to be bothered with it.
All hail my new signature!

Admit it. You're secretly green with envy.