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Abuses in the reverse-mortgage market are putting the equity and savings of millions of seniors at risk, according to the National Consumer Law Center.

The center recently released a report, "Subprime Revisited: How the Rise of the Reverse Mortgage Lending Industry Puts Older Homeowners at Risk."

The report found that some sellers of the products, which provide loans to seniors in exchange for an equity stake in their properties, use aggressive tactics and try to sell seniors products such as annuities and long-term care insurance that are not in the consumers' best interest.

"In the reverse-mortgage market, seniors face some of the same aggressive lending practices that were common in the subprime market boom," Tara Twomey, NCLC attorney and author of the report, said in a statement. "Well-funded marketing campaigns and perverse incentives to brokers are targeting seniors' home equity and using reverse mortgages as their tools."

The report alleges large banks, many of which helped fuel the subprime mortgage catastrophe, have now turned their attention to reverse mortgages as a source of profits that have dried up elsewhere.

Twomey said that stronger federal protections are needed for reverse mortgage borrowers.

"Reverse mortgages are complicated and expensive financial products that must be used wisely and regulated carefully, or profit- and volume-driven sales efforts can open the door to abuses and fraud," said NCLC attorney Odette Williamson in the statement.

More than 110,000 reverse mortgages are written per year, with a value of $17 billion, the NCLC said in its report.

Reverse mortgages can be extremely expensive for the consumer, with large fees paid upfront. If a senior dies or becomes sick enough to require nursing home care soon after taking the loan, forcing the sale of the home and repayment of the loan, the costs can be incredibly high for very little benefit.

Federal law requires that all seniors get independent counseling before taking a reverse mortgage, but the NCLC report says the quality of the counseling available varies greatly, and the increase in numbers of reverse mortgages has "outstripped the limited resources and uncertain funding for the counseling agencies."

The AARP warns that scammers using names that sound official prey on senior citizens with an interest in reverse mortgages to solicit upfront fees or gather personal information for sale to others.

The organization suggests researching such entities to determine if they are actually government agencies or affiliated with them.

For more information on the study, visit:

www.nclc.org

For information on reverse mortgages, see the AARP's Reverse Mortgage Education pages at:

www.aarp.org/money/personal/reverse_mortgages/

Consumer Action will respond to each properly submitted letter about a problem or question, either in this column or by letter or phone. Letters must include copies - not originals - of all relevant documentation and a name, address and phone number at which you can be reached. Send letters to: Consumer Action, The Press, 11 Devins Lane, Pleasantville, NJ 08232.

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