Consumer Issues
Reverse Mortgage Ads Can Leave Consumers with False Impressions
Here's what you need to know before you apply for a reverse mortgage
 
Reverse mortgages, also known as home equity conversion mortgages (HECM), are heavily marketed to those who are in or near retirement. They allow homeowners over the age of 62 with significant equity in their homes (i.e., much of their home has been paid off) to tap into that equity in the form of a loan. But the ads you see about these loans may not tell the whole story and this week federal officials have issued an advisory to consumers warning them about the risks that aren’t detailed in some ads.
 
How reverse mortgages work
The loan is called a “reverse mortgage” because the monthly payment is coming from the bank or mortgage company to a homeowner rather than the other way around as in a typical mortgage. Homeowners can also elect to receive the loan as a lump sum. The loan can then be used to finance repairs to the property, pay for expenses, or just supplement income. In some cases, the proceeds from the reverse mortgage are used to make monthly mortgage payments or cover annual property tax costs.
 
The dangers
The reverse mortgage market grew 1300 percent between 1999 and 2008 and currently comprises about one percent of the traditional mortgage market, with more than 600,000 outstanding loans. With this growth come scam artists who try to plunder nest eggs that have been painstakingly saved over a lifetime.
 
Congress directed the Consumer Financial Protection Bureau (CFPB) to conduct a study on reverse mortgages as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. A study published in June, which focused on 97 television, radio, print and Internet ads, found that consumers were left with the misleading impression that reverse mortgages are a government benefit and would allow them to stay in their homes for their entire lives.
 
Said CFPB Director Richard Cordray:
 
A reverse mortgage does not carry such guarantees. A consumer can tap into the equity too early and run out of funds. In addition, with a reverse mortgage, the consumer still has to pay property taxes, homeowner’s insurance, and property maintenance fees. All of these costs can be significant. And if a consumer does not meet these obligations, he or she can still end up in foreclosure. Most of the advertisements reviewed failed to mention such risks. Or if they did, they were so buried in the fine print that consumers did not pick up on these key aspects of the loan.
 
The language in some ads suggests that the products are a kind of entitlement for seniors that won’t have to be repaid. The reality is that these products have real financial impacts and do have to be repaid, usually when you die or when the home is sold – or, in the worst case scenario, if you neglect to pay homeowner’s insurance and/or tax bills, at which point you could face foreclosure. Beware that reverse mortgages may also come with high fees that further draw down on the equity of the home.
 
Also, while legitimate HECMs are backed by the Federal Housing Administration, the government does not endorse or promote any particular product or company. So, beware of ads that claim some kind of affiliation with the government.
 
High pressure sales
High-pressure sales tactics are sometimes used to try to convince homeowners to cash out their home’s equity in order to invest in risky business ventures or to buy high-ticket items with the proceeds. Sometimes, a consumer may be dealing with a con artist who will steal their money and walk away. Unscrupulous lenders, in a practice that is illegal, will also try to push other products such as annuities or long-term care insurance along with the reverse mortgage. The elderly have even been used as “straw seniors” in property flip scams.
 
 
How to Protect Yourself
If you or a loved one is interested in a reverse mortgage, get the facts straight before signing any documents. Be careful when responding to unsolicited ads for reverse mortgages. By law, you must meet with a reverse mortgage counselor before you apply in order to understand and compare costs, payment options, and fees associated with the loan. Make sure you choose a counselor independently and be wary if your lender chooses one for you. To find a counselor, visit http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm or call 1-800-569-4287.
 
CFPB is also advising consumers to consider three main points before taking out a reverse mortgage:
Reverse mortgages are not home loans. 
Advertisements may fail to tell the whole story about risks associated with the loans. 
Consumers need to have a plan in place in case they outlive the loan money.
 
The agency has also issued a guide for consumers considering reverse mortgages.
 
For further information on fraudulent schemes that target seniors, you can check out the FBI’s page.
 
This story was updated from a previously published post. 
 

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COMMENTS

B. Yerram Raju

1 year ago

In India both the retirees and the banks did not pick up this scheme. The scheme by design is made unattractive and there are no such Ads in India for this product. For a reader from abroad this article makes sense.

Alok Tholiya

1 year ago

ML or someone must study cases of reverse mortgage in India.

New Snowden Documents Reveal Secret Memos Expanding Spying
The Obama administration has stepped up the NSA’s warrantless surveillance program on U.S. soil to search for signs of hacking
 
This story was co-published with the New York Times. 
 
Without public notice or debate, the Obama administration has expanded the National Security Agency’s warrantless surveillance of Americans’ international Internet traffic to search for evidence of malicious computer hacking, according to classified NSA documents.
 
In mid-2012, Justice Department lawyers wrote two secret memos permitting the spy agency to begin hunting on Internet cables, without a warrant and on American soil, for data linked to computer intrusions originating abroad — including traffic that flows to suspicious Internet addresses or contains malware, the documents show.
 
The Justice Department allowed the agency to monitor only addresses and “cybersignatures” — patterns associated with computer intrusions — that it could tie to foreign governments. But the documents also note that the NSA sought permission to target hackers even when it could not establish any links to foreign powers.
 
The disclosures, based on documents provided by Edward J. Snowden, the former NSA contractor, and shared with the New York Times and ProPublica, come at a time of unprecedented cyberattacks on American financial institutions, businesses and government agencies, but also of greater scrutiny of secret legal justifications for broader government surveillance.
 
While the Senate passed legislation this week limiting some of the NSA’s authority, it involved provisions in the U.S.A. Patriot Act and did not apply to the warrantless wiretapping program.
 
Government officials defended the NSA’s monitoring of suspected hackers as necessary to shield Americans from the increasingly aggressive activities of foreign governments. But critics say it raises difficult trade-offs that should be subject to public debate.
 
The NSA’s activities run “smack into law enforcement land,” said Jonathan Mayer, a cybersecurity scholar at Stanford Law School who has researched privacy issues and who reviewed several of the documents. “That’s a major policy decision about how to structure cybersecurity in the U.S. and not a conversation that has been had in public.”
 
It is not clear what standards the agency is using to select targets. It can be hard to know for sure who is behind a particular intrusion — a foreign government or a criminal gang — and the NSA is supposed to focus on foreign intelligence, not law enforcement.
 
The government can also gather significant volumes of Americans’ information — anything from private emails to trade secrets and business dealings — through Internet surveillance because monitoring the data flowing to a hacker involves copying that information as the hacker steals it.
 
One internal NSA document notes that agency surveillance activities through “hacker signatures pull in a lot.” Brian Hale, the spokesman for the Office of the Director of National Intelligence, said, “It should come as no surprise that the U.S. government gathers intelligence on foreign powers that attempt to penetrate U.S. networks and steal the private information of U.S. citizens and companies.” He added that “targeting overseas individuals engaging in hostile cyberactivities on behalf of a foreign power is a lawful foreign intelligence purpose.”
 
The effort is the latest known expansion of the NSA’s warrantless surveillance program, which allows the government to intercept Americans’ cross-border communications if the target is a foreigner abroad. While the NSA has long searched for specific email addresses and phone numbers of foreign intelligence targets, the Obama administration three years ago started allowing the agency to search its communications streams for less-identifying Internet protocol addresses or strings of harmful computer code.
 
 
Courtesy: ProPublica.org

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COMMENTS

Ilya Geller

2 years ago

NSA spies on Internet not because it enjoys it, I am absolutely sure NSA is not enthusiastic about all these terrible scandals, which, by the way, only started and will worsen and worsen. I bet - NSA does not like to be known as the Evil.
NSA is forced to spy because the only available technology for NSA was SQL, which is external to data and is based on analyzing queries: NSA spies after queries because it cannot control data.
Fortunately, there is another, my technology.
For the past 70 years SQL (generic name for whatever IBM has done) dominated search for electronic information. It's external to data technology, which helps to distill patterns and statistics based on queries, from outside to data, externally. SQL technology emanates from External Relations theory of Analytic Philosophy: students of Moore, Russell and Wittgenstein established IBM and everybody followed their path.
However, there is Internal Relations theory, which is based on Bradley, Poincare and my ideas. In this theory patterns and statistics are found into structured data.
I discovered and patented how to structure any data: Language has its own Internal parsing, indexing and statistics. For instance, there are two sentences:

a) 'Sam!’
b) 'A loud ringing of one of the bells was followed by the appearance of a smart chambermaid in the upper sleeping gallery, who, after tapping at one of the doors, and receiving a request from within, called over the balustrades -'Sam!'.'

Evidently, that the 'Sam' has different importance into both sentences, in regard to extra information in both. This distinction is reflected as the phrases, which contain 'Sam', weights: the first has 1, the second – 0.08; the greater weight signifies stronger emotional ‘acuteness’.
First you need to parse obtaining phrases from clauses, restoring omitted words, for sentences and paragraphs.
Next, you calculate Internal statistics, weights; where the weight refers to the frequency that a phrase occurs in relation to other phrases.
After that data is indexed by common dictionary, like Webster, and annotated by subtexts.
This is a small sample of the structured data:
this - signify - <> : 333333
both - are - once : 333333
confusion - signify - <> : 333321
speaking - done - once : 333112
speaking - was - both : 333109
place - is - in : 250000
To see the validity of technology - pick up any sentence.

Do you have a pencil?

Being structured data becomes database: the database is absolutely secure, it can contain only legal information (because illegal will be discovered at once).
Personal profiles of structured data have no value neither for NSA nor any crook: they cannot be read and understood in no way. The users finally will get their 101% privacy - see the sample above.
NSA will soon stop to spy and start to do everything legally.
Does not have sense to fight the Government - better to propose something that is suitable for everybody.

CBI notice to KMC for licences issued to Saradha
The Central Bureau of Investigation (CBI), which is probing the multi-crore rupee Saradha scam, has sent a notice to the Kolkata Municipal Corporation (KMC) seeking details about the licenses it issued to the tainted group.
 
Addressed to KMC's chief manager (licensing), the notice has sought details about the trade and other licenses given to the Saradha Group of companies.
 
The notice dated June 4, has also sought details about the fees paid to the KMC for issuing the licences as well as information about the nature of business for which they were issued.
 
Reacting to the development, city Mayor Sovon Chatterjee accused the BJP-led central government of diluting the significance of the CBI. 
 
"It's an official letter to the KMC and whatever information they have sought we will provide. "But the way, the central government is diluting the significance of the CBI, its prestige, it really is worrisome," he said on Monday. 
 
KMC councilor Prakash Upadhyay, who had earlier approached the CBI as well as the Enforcement Directorate (ED) accusing Chatterjee of being involved in the scam and "unscrupulously issuing trade licenses to the company, welcomed the move. 
 
"Many had doubted if my fight would yield result, but today I feel vindicated. I have always maintained that Chatterjee was involved and all the truth will come out," he said. 
 
Upadhyay had earlier submitted documents to both the CBI and the ED alleging that Chatterjee, also a legislator of the ruling Trinamool Congress, used his influence to give over 40 trade licences to a company of the Saradha group which has a registered office in Diamond Harbor which falls under his constituency. 

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