REVERSE MORTGAGES - THE SUB-PRIME TRAGEDY FOR THE ELDERLY

Companies and people in the lending business never give up, and it's why strict banking regulations are as important now as the world found out they were when they analytically determined the reasons for the Great Depression.

Nevertheless, those regulations have been relaxed, some by interpretation, others by changes. Many, including me, think we are on the way to a new set of financial tragedies.

The sub-prime loans have ripped to shreds the financial present and future of thousands of young Americans, and the scars will remain with them for a lifetime. For many it will be the same as the stories that are still told about a family that lost everything in 1929. They will be told by subsequent generations.

But America has moved on, and now while we are scrambling to save ourselves, the money lenders are preying on the elderly through the magic the lenders promise will come to them from a reverse mortgage. There are no serious attempts to make certain those borrowers fully understand the dynamics that can and will accrue to them and their family if they make such a loan. Most find it akin to winning the lottery.

And there is apparently no penalty to a lender who makes such a loan to a person riddled with dementia, often times being represented by one of their grown children through power of attorney.

So frequently the cash proceeds from the reverse mortgage find their way into the hands of that person's children, who then piddle it away on a new car or to bail out their own credit card abuses. Or maybe the elderly person makes generous gifts to his church or other charity.

So when the time comes for the borrower to use the money for his own subsistence, there's little or none left. The children, the church and the charity aren't expected to reverse their participation in the transaction. The person is alone.

And finally, frequently the borrower finds his health doesn't allow him to remain in his house until his death. Maybe it was only a year or so. Now he has to move, say to assisted living quarters, and the house has to be rented. But in most cases, his control of the house is only through a "life estate." Can he, in fact, legally rent it, or must it sit there vacant until his death?

In retrospect, it becomes evident that a far better idea would have been to sell the house rather than borrow against it.

Reverse mortgages are, unfortunately, the sub-prime tragedy for the elderly. If this product is to remain a legal loan form, then it needs to be strictly regulated.