The economic dust

So it looks like there is a three to the one-two punch of the sub-prime lending — There is a common scam operation behind the reverse mortgage lending as well.
The New York Times in a story “Tapping Into Homes Can Be Pitfall for the Elderly” by Charles Duhigg today looked into this “golden opportunity,” available only to people in their 60’s who own their homes:

But hundreds of people who have sought reverse mortgages ? in lawsuits, surveys and conversations with elder-care advocates ? have complained about high-pressure or unethical sales tactics they say steered them toward loans with very high fees. Some say they were tricked into putting proceeds of their loans into unprofitable investments, while sales agents pocketed rich commissions.
?Every scam artist is getting into this business,? said Prescott Cole, an elder-care advocate who has worked with numerous reverse mortgage borrowers. ?Because reverse mortgages are so complicated and give you money up front, years can pass before a senior realizes they?ve lost everything.?

I guess I have that old person habit of following along with my cusor while I read — sort of like combating the failing vision by keeping my finger on the line — and as I read the “lost everything” I inadvertently double-clicked. That utility that defines words for you popped up and defined “everything” for me. Somehow the definition was not really expressive of working all your life to buy a home and then finding in your retirement years that you will be left with literally nothing.
The article states that “reverse mortgages have grown into a $20-billion-a-year industry, with elderly homeowners taking out more than 132,000 such loans in 2007, an increase of more than 270 percent from two years earlier.”
Apparently in the incident in the story, which is reported not to be one unique circumstance, the bank talked the home owner into a loan and investment package, lending the value of the home and talking the borrower (once the papers were signed, no longer the “owner”) into putting most of the money into investments. The borrower got a small bit of cash and an annuity based on the income from the investments. Of course there was a hefty fee for processing the loan, and another one for setting up the investments and the annuity. Then the investments went downhill, and the borrower was left without income and sucked into debt — something like that. Sort of a sub-sub-prime based on the principle of finding someone who has something and getting them to pay you to take it away from them.

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