Reverse mortgages could be the next subprime mortgage product to experience rapid growth while taking advantage of a vulnerable segment of the population, top U.S. bank regulator John Dugan said Monday.
In a reverse mortgage, the homeowner receives money from the lender, which does not have to be repaid as long as the borrower lives in the home.
“I believe the critical lesson here is the need to act early, before problems escalate,” Dugan said.
He said regulators need to set more standards for proprietary reverse mortgages. Regulators also need to be vigilant about misleading marketing and need to crack down on any lenders who try to bundle a reverse mortgage with other financial products, such as an annuity or life insurance product, Dugan said.
