Let me play psychic for a second.
Remember when sub-prime mortgages were all the rage? When folks got snookered into borrowing more than they ever should have and then the whole "industry" just went kaboom?
Well, guess what? They're at it again.
Before too long we will see the reverse mortgage business blow up as well.
These mortgages work by using the value of the existing home and offering the owners a lump sum, payments or a combination of both.
After that, the "owners" are responsible for all taxes, insurance and maintenance of the house.
All of these responsibilities involve variables.
Taxes can and do go up. Insurance rates can and do go up, especially if a claim has been filled. Not to mention most people have a deductible on their homeowners insurance.
The best part, though, is the one about home maintenance.
Surely we all remember that this "house/home maintenance" thing has been used to cheat people out of their homes in eminent domain cases.
Well, there is nothing to prevent reverse mortgage lenders from using the same arbitrary rules of home maintenance to prove homeowners are not in compliance with the contract they signed.
Now, I don't want to be alarmist, but, come on. I, for one, can see this coming from a mile away.
Now, it will probably take a "minute", but make no mistake, these chickens will come home to roost, too.
Bit by bit, more and more retirees will show up at the doorsteps of their adult children.
Maybe, in the beginning it won't be so bad. Maybe their adult children even expected to have one or both parents live with them and have made arraingments for it. Eventually though, it will hit folks that can't take in their parents.
I am not talking about selfish individuals unwilling to help their aging parents.
I am talking about folks just getting by, or not, on a minimum wage job, living in a one bedroom apartment, they can barely afford, with kids of their own.
I am talking about people squeezed to tight, they don't know whether they're coming or going.
So the questions I have are:
Where will these people go when they lose their homes?
Who will be able to give these people a roof over their heads?
Will adult children be guilted into taking on more than they can handle or afford?
What about folks with no living relatives to take them in?
Will we establish poorhouses again?
Reverse mortgages are no different than payday loans. They are not meant to help you, but ensnare you in a vicious cycle or robbing Peter to pay Paul.
If you know someone thinking about using a reverse mortgage to make ends meet, make sure they understand the pitfalls.
Don't allow any retired person to be bamboozled by some slick talking lender trying to sell them rose colored glasses.
It's your choice.
Be involved now in the financial decisions your parents make now, or make sure you have room available when they show up at your house with all their worldly goods.
Just sayin'.