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Mike Bloomberg Plans to Take on the Reverse Mortgage Industry

Mar 03, 2020 by Maurie Backman
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Today's retirees didn't have the same access to IRAs and 401ks early on in their careers as workers today. As such, many kicked off their golden years without much in the way of personal savings, and those without pensions are forced to live mostly on Social Security -- a program that only pays the average senior about $1,500 a month.

As such, many older Americans rely on the equity they have in their homes as a means of accessing money as needed. That's exactly why reverse mortgages have been pitched for years as a viable solution to seniors' financial woes.

A reverse mortgage, as the name implies, lets homeowners receive money based on the equity they have in their homes rather than pay a lender on a monthly basis. At face value, it seems like a great option for cash-strapped retirees.

But reverse mortgages have their share of drawbacks. They come with hefty fees, they're difficult to understand, and they don't actually offer any relief with regard to home maintenance costs and property taxes, thereby putting seniors who borrow this way at risk of losing their homes anyway.

And the nature of the reverse mortgage industry, consisting heavily of salespeople who prey on seniors by appealing to their fears and pushing a product that, in many cases, is not nearly as helpful as it might seem to be, has long been blasted as predatory.

One presidential candidate clearly isn't happy about that and wants to see some changes. In February, Mike Bloomberg revealed a plan to shore up retirement for seniors that includes Social Security reforms, expanded Medicare coverage, and protection against reverse mortgages.

Bloomberg's take on reverse mortgages

Other presidential candidates have touched on reverse mortgages, but Bloomberg has gone so far as to specifically call them out as predatory. As such, he plans to develop new financial products that work similarly to reverse mortgages, only without the drawbacks that currently come with them.

Specifically, Bloomberg insists that his products will be less costly for seniors and more transparent. Furthermore, he intends to improve financial literacy among older Americans so they're better positioned to make smart choices with regard to their assets, homes included. And, he plans to promote state programs allowing low-income seniors to defer their property taxes, thereby leaving them with more money to pay their basic expenses.

Now to be clear, Bloomberg isn't the only candidate advocating for seniors. Though Senator Bernie Sanders of Vermont hasn't officially released a stance on reverse mortgages, he's made it clear that aging in place is a right every senior has, which implies that he's invested in programs that make homeownership more affordable later in life.

Senator Elizabeth Warren of Massachusetts hasn't spoken out directly on reverse mortgages either, though her efforts spearheaded the establishment of the Consumer Financial Protection Bureau, which has led to increased regulations for the reverse mortgage industry.

Though reverse mortgages are an appropriate financing option for some seniors, they come with their share of dangerous pitfalls. The fact that one presidential candidate has expressed plans to offer alternatives is encouraging news for older homeowners.

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