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The Office of the Comptroller of the Currency (OCC) recently issued a Consumer Advisory titled “Reverse Mortgages: Are They for You?” The advisory is designed to educate older homeowners on the ins and outs of reverse mortgages and their possible alternatives.

The advisory offers basic facts borrowers should know, the costs and benefits associated with the loan product, as well as some important rules to consider when opting for a reverse mortgage:

A recent report from the National Consumer Law Center (NCLC) warns that the reverse mortgage industry could very soon become the new subprime. The report claims that former subprime lenders have altered their business model in order to cater to reverse mortgages instead. While the products are very different in their makeup, the NCLC says the ways in which subprime and reverse lenders attract customers may be the same:

Some of the same U.S. lenders that helped drive the real estate boom with loans to home buyers who couldn’t afford the payments are now targeting seniors, the center said. Brokers, who are given financial incentives to sell the loans, may be making misleading claims to potential customers, according to a report titled “Subprime Revisited,’’ that was released today by the Boston-based NCLC.

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The Department of Housing and Urban Development (HUD) along with the Federal Bureau of Investigation (FBI) has issued a special warning for homeowners over the age of 62. With the number of reverse mortgages, also know as Home Equity Conversion Mortgages (HECMs), drastically on the rise, the opportunities for fraud are immense.

“According to HUD, the number of HECM loan originations insured by the Federal Housing Administration rose from 7,923 in fiscal year (FY) 1999 to 112,013 in FY 2008, representing an increase of more than 1,300 percent. HUD-[Office of Inspector General]OIG anticipates that the number of HECM originations will rise significantly in 2009 due in part to an increase in HECM loan limits from $362,790 to $625,500. The increasing senior victim population –– currently worth $4 trillion in home equity and estimated to grow by 10,000 people per day through 2011 –– coupled with program vulnerabilities, such as the lack of income, credit, or employment qualifications, creates significant opportunities for fraud perpetrators.”