Reverse Mortgage Class Action Lawsuits
Reverse Mortgages are becoming popular and in most cases a safe way for older Americans to gain greater financial security without having to cash in most of there hard earned investments. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements, and more. However, as with any financial transaction, fees and other expense also come with this new financial instrument and whenever money is involved illegal or shady practice are sure to be found. Over the past several years there have been a number of reverse mortgage class action lawsuits seeking relief for these senior citizens.
Many of the complaints filed in these lawsuits alleged that lenders took advantage of the senior citizen’s need for cash income by selling then a “reverse mortgage”. Under the schemes attempted, seniors borrowed against the equity in their homes, as is allowed by law, however they were charges excessive fees and processing charges which were unrelated to the actual loan that was being provided. These fees were capitalized as part of the loan and thus subjected to compounded interest rates over the life of the loan. Utilizing these schemes, corporations were able to earn extremely large profits while providing very little in the long term for the senior citizens.
Another scheme which was utilized consisted of a required "life annuity" designed to replace the monthly loan advances after a number of years, in effect having the borrower fund the future monthly advances. The annuity is payable only to the borrower -- there is no death benefit -- and therefore, the if the borrower does not live long enough to see the maturity of the annuity, he or she receives absolutely no value, even though the loaner charges compounded interest on the costs of the annuity from the beginning to the end of the loan.
These reverse mortgage class action lawsuits purposes were to protect the elderly from an overly aggressive creditor. Many states have enacted legislation specifically addressing this kind of elderly abuse, recognizing that senior citizens are vulnerable to the predation of profit seeking financiers. The elderly, ought to be able to trust and rely upon their banks to treat them fairly. Lawsuits of these kind seek to protect a class of senior citizens who are often trusting and do not have the means to do it themselves. These suits have also brought the profits that are being made from reverse mortgage more in line with other financial products.
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