Seen today on T.V. - The Fonz (Henry Winkler) doing an ad for reverse mortgages.
The primary pitch was money to pay medical bills and to "reduce the stress of having a mortgage payment".
What will happen when the bank has paid out all the equity the homeowner handed over? Several things:
- House goes onto the market, increasing inventories; or bank holds it on their books for a write off or bailout II from the FED.
- Kids don't get a paid off house or equity of a sale, they are left with nothing.
- More income for the healthcare machine, and no pressure to reduce costs.
These are not good signs.
The leveraging started by banks, bank holding companies, hedge funds, etc., is now being pushed down to the level of the average household.
If you were responsible and saved and paid down your mortgage, those assets will quickly be eaten up by losses in the markets, higher taxes, less coverage with higher premiums, and higher fees and costs for everything.
Your options are few; once savings are depleted, the reverse mortgage becomes the only option for some. These reverse mortgages are being sold hard - not only Henry Winkler but Robert Wagner and other actors appealing to the Baby Boomers sense of nostalgia and trust.
Instead of Mom and Dad having a house that they worked to pay off and savings and retirement, after one year of battling cancer or another disease they will be broke; Medicare covering less and less, and the reverse mortgage of the old home the only way to get cash for treatments.
Disclosure: No positions