Reverse Mortgages Are SCAMS!!! - Dave Ramsey Rant 

There’s always somebody looking to take what little you have! Scammers , thieves , criminals

Oh, good Lord. Failing to pay your taxes or meet guidelines does not make reverse mortgages a scam.

The government owns your house and if you don't think so........ stop paying your taxes and you'll find out real fast who really owns your home and it ain't you. The government will take your home at gun point (the local police) if necessary. It is my personal opinion that once a person hits 65 years of age, they should no longer have to pay property tax on the home they are living in and they can only claim one place as their residence...... but that's just me.

The thing is, she was 80 at the time of taking out the loan. with living to at least 92, she was on the winning side of the transaction and would've lost her home either way without paying taxes.

Carlton Sheets said, " a banker is a guy that loans you an umbrella when its sunny outside, and asks for it back when its raining."

I’m here because I had a call yesterday from a friend from my church. She’s 91. She has a reverse mtge and is going to lose her home and doesn’t know where she’s going to go. I’m researching this scam and ended up here. Thank you, Dave Ramsey. This is so ugly, I can’t bare it!

a key point - complexity. Complexity is the consumer's enemy, and a weapon for companies. Avoid complexity in everything you can because it puts you at a disadvantage and gives companies more places to play a shell game.

Dave so what you're saying is that this 92 year old lady should've took out a 15 year mortgage in 2008 which she would of been approx. 83 at that time ? If she cant pay her property taxes not having a mortgage payment , how is she going to be able to pay the taxes plus The mortgage payment ?

Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.

Well you can loose your home even if you own outright and don't pay property taxes !happened to my friends dad who had altimerze. You have to take into consideration seniors have health problems and forget about bills. Just remember you never really own your land thanks to tax!

Last year, my 65 year old friend took out a RM on her home of 35 years. She had about $40K in credit card debt accumulated over many years and was just barely able to afford the minimum payments along with her living expenses each month on her limited retirement income. She said no one would give her a loan or other debt remedy short of bankruptcy. She has no real family other than distant relatives, none of whom would want or need her home so what happens after her death is not particularly important to her. Her RM completely eliminated her CC debt and the exorbitant interest rates. Without that debt burden, she is now able to fully enjoy what income she gets each month and easily sets aside money for tax and insurance each year to satisfy her RM obligation. Before her RM, she was overwhelmed and in a very bad way. Now, whenever I talk with her, she always seems to mention how the RM has made the last year the happiest in a very long time and that it was the best thing she ever did.

She had $400,000 equity in her home and couldn't pay her taxes? Where did the money go?

90 year old grandma's/Grandpa's losing homes 🤦. Just thinking about that just pisses me off ...

This is Obsolete Information. The only requirements of a Reverse Mortgage are: keep property taxes and homeowner's insurance current. And, continue to maintain the property. Sounds like this lady should have set up a LESA (Life Expectancy Set-Aside), which would have impounded her future tax and insurance requirements. That situation would not happen today.

Sounds like they are losing their homes for not paying the property tax, which is a seperate issue completely and has nothing to do with the reverse mortgage itself.

It sounds like a tax and insurance problem not a loan problem.

My aunt just lost her home to the reverse mortgage process, with this exact company. She got behind on her taxes which is what put her into foreclosure. It is opened my eyes, needless to say. She lived in this home 58 years.

Tom Sellick says it’s a risk free deal !! Why would he lie to us ??? 😂

Part of the problem is that with traditional mortgage Taxes and Insurance is usually held in some escrow fund and are paid by the lender. With reverse mortgage this doesn't happen and the individual must "PLAN" to pay taxes and insurance when due. Those that do not - can loose their home but that wasn't the mortgage fault. If a lender lies to seniors just to close a deal, again that isn't the mortgage fault. The tool itself isn't a ban tool, its those that represent and sale them and those that fail to plan. - Thanks for your opinion Dave.

My cousin, who is an accountant, mentioned my grandma, who died at 90 last year getting a reverse mortgage. I said absolutely not. She was bad with money to begin with, left my mom a whole mess to clean up, and a reverse mortgage would've just doubled the misery. I'm so glad we didn't go that route.

There should be steeper punishment for people that take advantage of our elderly.

From experience, he is so right about NationStar. They were trying to take my mother's house and will not accept any documents. Specifically, they said to submit a document to get a lower payment and the documents were never good enough. All were rejected and we received a different answer every time. We had to sell her home to get out of this mess. She is in good shape now. I would personally take heed to what this man is saying. But that is just my experience trying to help my mother out.

Imagine owning your home and deciding to do this. All that smart down the drain

Mortgage or not, you have to pay taxes and insurance. Without a mortgage payment, you will have MORE income to pay those two things. She is more likely to lose her home with a traditional mortgage because she would have less income. It’s common sense people.

thats true every word you spoke,DAVE, my mom took out one of these loans and lost every thing when cancer took her from us, i tried to tell her she didnt listen,, be blessed and safe

Hey guys, I used to be a reverse mortgage loan officer so I can give some insight: It’s called a reverse mortgage because instead of the home being paid off overtime, the loan grows overtime. There are no required payments. And the loan can never grow more than the homes worth. The mortgage company does not keep the home, they just want you to pay back the loan when ya die. It’s a niche product, but it’s helped a lot of seniors that are struggling. Seniors struggle, we neglect them and they struggle. Call your parents more and stop watching RU-vid.

Okay I failed to see what the reverse mortgage companies did wrong here. when the borrowers agree to the contract they agreed to pay the taxes and insurance. Further, many states and localities have exemptions for people over a specific age for property tax.

A Property Tax lien- is superior to any other lien. If you don't pay your Property Taxes- the Home will go into foreclosure. It will then be Auctioned off to the highest bidder. The Tax commissioner doesn't care how much the Home sells for- as long as He/She breaks even with the taxes that are owed.

Hey Dave? What happens when you owe back taxes on a free and clear property or a property that is conventionally financed? Sale on the courthouse steps! Apparently you are telling gramma's they don't need to pay property tax or insure their homes. Great advice.

If these people can not meet their property tax obligations, they need to downgrade their homes. No loans were every going to help them.

This is exactly what happened to my mother. Her house was paid off, she got a reverse mortgage and ended up losing her house. After ten years the principal was practically untouched.

Taxes and insurance would have to be paid regardless. A regular mortgage doesn't pay taxes and insurance. If that's your only argument against reverse mortgage, then you are wrong

No body owns anything, we only lease it. Don,t believe me, just stop paying taxes or upkeep on your property. They will remove you from it!

Many of these seniors are taken advantage of due to their fear of having to move out of their accustomed house, no matter how big or inappropriate it may be for them now. Sell your house and move to a smaller place, that will prevent your heirs from having to deal with that and all your material possessions when you are gone. Then your equity will be in your savings account, not tied up in a complex contract.

We need to hire Magnum P.I to investigate into this!

If you dont pay your taxes and insurance on a forward mortgage, you also lose your house. How does that indicate that a reverse mortgage is a "scam"?

I really lost respect for Tom Selleck when he started hawking reverse mortgages. It just made him a used car salesman

So I'm coming in on the tail end of this conversation. My aunt was 92 in 2006 when an older gentleman at her senior day care center talked her into meeting "the people" (reverse mortgage people). Long story short, they gave her a $157,000 loan on a cement block home that wasn't even worth $50,000. I started with the FL attorney general who said that some unethical practices may have taken place, but nothing illegal. He said if I could prove a crime had been commited, contact the sheriff. In 2009, the loan was "refinanced". I found about both loans after the fact because aunt would rather believe anyone but her educated niece. By 2013, my aunt was penniless. She died at the age of 101. Still clueless. I've talked to everyone I can think of. Lawyers are not interested. What's in it for them? I'm still in the home. A tree in the yard fell into the neighbor's yeard during a storm and the mortgage company who just started paying taxes on the property says I'm responsible. I could go on and on. Just sharing.

The problem is that if you fail to pay taxes, keep insurance or do repairs to their satisfaction, you are ALSO then in default on the terms of the mortgage.

And who’s fault is it if someone decides not to pay their property taxes and insurance? Who should pay this if these people fail to do so?

So the loans themselves did not result in their loss of property: Their failure to pay their property taxes resulted in their loss of property. If you do not have a reverse mortgage, and you don't pay your property taxes, the county/city can foreclose on your property and you can lose it. Why aren't you paying your property taxes? Well, Virginia said she didn't have the money to pay them. Would she have had the money if she didn't have the reverse mortgage? No. And here's the thing. These people who are losing their homes would have been unable to pay their taxes and would have lost their homes without a reverse mortgage. But you would never hear about it, because it wouldn't be attached to a loan that a reporter can't understand and so can't portray as risky and the cause of the loss. These borrowers lost their homes because they didn't pay the taxes on their property, not because they had reverse mortgages.

The loan program is not causing seniors to lose their homes. Their bad choices, sometimes helped along by 800 number telephone loan officers, are causing it. The terms of the loan include your paying of the taxes and insurance and keeping up your house. Of course they will foreclose if you violate the terms of the loan.

From Dave Ramsey I would have expected a more elevated discussion about reverse mortgage. I’m trying to research this issue and David is ranting and raving, without dispassionate analysis. Thanks Dave. Makes me question your other, previously highly appreciated advise on other issues.

Can we "in-voluntarily terminate" Congress?

It wouldn't make any difference if she didn't have a reverse mortgage. The town would take it for unpaid taxes anyway. At least with the $400k, she was able to pay her bills to this point. Sad that anyone loses their home, but in this case the mortgage is not the villain

I don't care what type of loan you have, if you don't pay your taxes nothing good will follow.

What did the 92year old lady do with the money? Too many seniors get the money and then their relatives (children and grandchildren) find a way to get it...

This is absolutely incorrect information! You sign a federal contact saying you’ll pay your taxes and homeowner’s insurance when you do a reverse mortgage, you have to do that regardless of what loan you have.

IF SHE COULDN'T KEEP UP WITH THE TAXES OR HOME OWNER INSURANCE, HOW COULD THEY HAVE PAID A REG MTG? LET'S BE REAL?????

While reverse mortgages CAN be scams, this is NOT always the case. Two years ago, my mother and stepfather called me up and they were upset. Their house needed EXTENSive repairs and they couldn't afford them. I considered just lending them the money but they are financially irresponsible and unreliable. Then I considered buying their house from them at a reduced cost and giving them "life estate". Then they could use the money to do the repairs and live on the rest. When I spoke to a lawyer about this, he said it was a VERY bad idea because purchasing the house at a reduced cost could be considered "elder abuse" if anyone contested it. And it would open me up to felony charges. The lawyers suggested I give my mother and stepfather a reverse mortgage for the amount I would have purchased the property. That way I am protected both legally and financially. So now I hold a lien on the property and they have a nice house and some extra cash.

Dave, if you don't pay your property taxes on your home, you too will be foreclosed on. It has nothing to do with having a reverse mortgage or any mortgage for that matter.

My uncle took out a reverse. He passed away. It is a nightmare for his kids to deal with now.

As someone who procures these types of loans, I'll throw in my 2 cents: First off - the reason people are losing their homes under this program is because they are not paying their property taxes. They are responsible for their property taxes whether they have a reverse mortgage, a traditional mortgage, or no mortgage at all. Dave Ramsey seems to have completely missed this point which is surprising given his experience with finance. I don't think he actually missed the point at all - he just chose to conveniently ignore it for whatever reason. Is there anyone reading this that owns a home that thinks they will not be foreclosed upon if they fail to pay their property taxes? In other words: This is COMMON KNOWLEDGE. Everyone KNOWS they must pay their property taxes. It's in the paperwork - and it specifically tells people they must pay their property taxes. Furthermore, all seniors must go through Federal HECM counseling with a licensed counselor BEFORE their application is taken. The counselors ALSO tell them that they must pay their property taxes. The point being is even if the loan officer failed to properly inform the borrower, the paperwork itself AND the mandatory counseling session covers this. Multiple layers of disclosure and protections exist in this product. Additionally, if a senior has enough equity, they can incorporate the payment of the taxes and insurance into the loan - just like a traditional impound account - and then they really don't have to pay it out of pocket. The option exists for those that have the equity and want it to be implemented. Secondly, Ramsey's claim that interest rates are "twice as high" on a reverse mortgage are completely FALSE. He compared a "5% rate" to a 3.125% 15 year fixed. Most people don't have 15 year fixed rate loans - they have 30 year fixed rate loans that have higher rates. At the time of this writing, a 30 year fixed is about 4.25%-4.50%. Guess what a fixed rate reverse is? About 4.5% - 4.85%. Is that "twice as high" has a traditional mortgage? NO - IT'S NOT. Even at the time Ramsey made that statement you could get a fixed rate reverse around 4.75% while the 30 year was about 3.875%. Yes - the HECM was higher - but not nearly "twice as high." Just an outright distortion of reality by Ramsey. Finally, he mentioned about how on a $100,000 house, a borrower could get $60,000 and therefore suggested that somehow the borrower is being ripped off. It needs to be understood that THIS IS A LOAN. They are not purchasing the borrower's house. They didn't pay $60,000 to purchase a $100,000 property. It's a collateral loan, just like a traditional mortgage. Even on a traditional mortgage someone would put 20% down and the loan would be for the remaining 80%. No one would argue that "the bank just bought the borrower's house for 80% of what it's worth." That would be a total mischaracterization of what happened in the transaction. The borrower still owns the home, and the bank has a voluntary lien on the home - just like a traditional mortgage. The only real difference is that the borrower doesn't make a payment, and the interest accrues (the loan gets larger). I've been in the business for over 20 years, and ironically, as much heat as this product gets by people like Ramsey, among my clients it has 100% satisfaction. I have literally saved people from being homeless, I've saved them from having to move in with their kids, I've saved them from having to move to senior facility where they didn't want to live, etc etc. For some older people, this this their one way to improve the quality of their lives. They receive a $850 SSA check, live in a house worth $500,000, and still owe on an $80,000. This loan is life-changing for them. It's NOT for everyone, and full disclosure and understanding of the product is critical. Easy for Dave Ramsey to tell someone not to get a reverse mortgage while he probably travels the world and enjoys his multi-million dollar lifestyle. Will he give that little old lady who's struggling an extra $1000/mo out of his own pocket so that she can live a more comfortable and secure life? I didn't think so. The HECM loan helps that borrower help herself - by eliminating her payments, and getting cash out to pay off bills and make repairs, etc. There's fraud and misrepresentation in every industry. Some people really need, and benefit from this loan. Others don't need it at all. It's not one-size fits all.

It is sad that people are going after old people and trying to weasel them.

They would owe taxes even if they did not have a reverse mortgage. That is not the loan failing.

All reverse mortgages do is buy you time to stay in your home before you lose it, but they take away your ability to make that decision on your terms. Would you take the deed to your home to a casino and bet it on black? You have a better chance of winning at a casino than coming out ahead in a reverse mortgage.

let the bank take it back... my parents are outliving the loan anyway...bank looses in our case...Reverse Mortgages work in many circumstances.

Just to clarify: 1. Homeowners risk foreclosure when they don't pay property taxes. This is true whether they have a forward mortgage, reverse mortgage, or no mortgage at all. The issue in the referenced article is not about the reverse mortgage; it is about tax default. 2. Foreclosure rates are naturally higher because of many factors - older homeowners are high risk for financial shocks, and the borrower profile between 2007 and 2013 included mostly "needs-based" borrowers who were high foreclosure risks. Loans generated since 2013 have much lower default rates. 3. Interest rates are naturally higher for non-recourse loans with no monthly repayment obligation. Current rates in the 4's are considered extremely low for this type of loan. 4. Until 2013, the reverse mortgage was primarily an asset-based loan; the borrower's ability to make payments was irrelevant. This is why credit underwriting wasn't required until tax defaults became an issue. 5. Since financial assessment was implemented, data shows a "T&I [tax and insurance] default rate of about 0.6%, and an overall serious default rate of 1.2%" (New View Advisors). 6. Scams show satisfaction ratings close to 0%, yet reverse mortgage borrowers generally report satisfied/highly satisfied at a rate approaching 90%. As such, using the term “scam” may be inappropriate.

I'd rather sell my home, invest the proceeds in an income producing investment and move into a 55+ senior community rental apartment. Home ownership isn't all it's cracked up to be when You reach a certain age, best to enjoy the fruits of your labor then someone else....

What if you are old, own a home, and have no heirs? A reverse mortgage makes sense here, but one can get a better deal. A better option would be to sell the home, get an apartment and put the lump sum of the sale into an annuity that will pay the rent and give income for hopefully the rest of your life if you structure payments correctly. If you outlive the annuity payments, you will still get a monthly check from Social Security that will just pay for your bare essentials so you can finally die broke.

Nothing to do with the mortgage, she needs to pay taxes.

In my state seniors pay no property tax on their primary home.

There is an old saying " if it sounds to good to be true, it usually is untrue'.

It is a legal document ! It is necessary to engage a lawyer to explain the cons , which can put the homeowner out on the street ! Be very careful !

Its funny how Dave can make this so funny, and at the same time explain it

I've been investigating a reverse mortgage. Other than losing it for not paying taxes or insurance (which I'd do) what are the other risks? I plan on using money to renovate, and rent out rooms via Airbnb.

Of course if you don"t pay your taxes or keep up with the maintainence on your house it doesn"t work,you know this at the onset,right?It fails because the home owner doesn"t keep their end of the deal-where"s the scam?

Here's what my former mother-in-law did after her husband died. They lived in Las Vegas and mom loved to gamble. She got a reverse mortgage so that she could go out to lunch and gamble, everyday!!! So when she died, there was barely enough money to bury her!!!

The problem is not the loans, it's the fact they are not paying their taxes and insurance. Dave, How do you not see this???

I was involved in the Reverse Mortgage business for a few years. I can tell you that most of the people who take out these mortgages are in desperate situations at the time they take them out and the mortgage allows them to continue living in their houses for many years! Irresponsible owners who take out the mortgage and then act irresponsible with the money they have access to from the mortgage.

Love how multimillionaire actors give financial advise, I just laugh.

So what is YOUR solution for an elderly person who has no liquid assets, lives off minimal social security, can barely pay bills for a near-poverty lifestyle, but has a ton of equity in their home?

When I first saw the commercial of reverse mortgages (by Henry Winkler), at first it sounded good - at least with not losing your home. But then almost immediately I realized this didn't make sense and it was a scam.

Im not even the biggest Dave Ramsey fan, BUT his laughter during this clip was EPIC! 😂😂😂 I LOVED IT

Why is it a surprise that these reverse mortgages have high default rates compared to standard FHA loans? The people taking these are desperate and broke. Many will be doomed to failure from the start. A lot of old people take these out just to get the quick cash on a near unsellable home with problems and then hand it over to the bank and let them deal with trying to get something back out of it. Not only am I surprised people are willing to do these goofy loans but I can’t believe the banks are willing to do them. They must not pay much at all and expect foreclosure.

My reverse mortgage is now worth more than the market value of the house??? Why? I took it out when the house was appraised at the top of the curve in 2009. We never draw from it because we don't need the money. Two years later the market dropped 50% but the RM grew during that time!!! Why did I do it? 1-I did not want to loose what I gained in my last house in the new house and I wanted a steady retirement fund for my wife. 2- Now the RM grows at a rate of $1400/month. It is like the RM is paying us rent to live in our house! 3-An RM can protect the value of the house in a declining environment. 4- The credit line grows tax free and all income from the RM is TAX FREE! 5- It can be used as a credit line with an option to pay down the debit. 6- The credit line can used if the market is down and stocks are low. I agree though it is not for everyone. The rules have changed so check the new rules.

It's unfortunate that this borrower ended up in this situation, and it's possible that the lender did not explain to her that she would need to pay the taxes and insurance herself using the monthly payments. Reverse mortgage are not scams and it seems that the ones that do "fail" are due to borrowers not completely understanding what they are responsible for. You also stated that VA loans were for deadbeats who didn't have the money for a down payment, yet they have the lowest foreclosure rate of ALL loan types. Stay in your lane Ramsey.

My mom is losing her home in September I wish we would have known this years ago

You would be much better off selling the house and getting into a assisted living or getting a less expensive home

A basic economics rule: poor get poor! How those banks doing these games get paid for their time? YOUR $$!

Dave in the example you gave the homeowner still has roughly about 40% equity. If the house was sold she would still have $160,000 Tax free left after selling the house and paying off the loan balance even if she took the max! ( Her max at 50% would have been about $200,000.) That RM allowed her to stay in the house. She IS 92. Poor widow? Hardly!!! What is the default rate for homeowners with conventional mortgages? Probably more!

The sarcasm is gr8 actually

If you don’t have enough you SELL YOUR HOUSE and MOVE so you have enough money. Take the difference in an annuity or something.

I've always thought reverse mortgages were a bad idea. That's why I've never bothered to get one. However, the question not asked and not answered in this video is why do people who take out reverse mortgages fail to pay their taxes, etc?

Simple to prevent this from happening, if you get a reverse mortgage just have an escrow account set up to take out taxes and insurance automatically. And a financial assessment should be done before anyone considers a reverse mortgage. It's just common sense and part of being responsible as anyone would have to be with any type of mortgage.

A 14 % foreclosure rate is not a "complete failure". I wonder how many elderly people empty their checking to televangelists - after they began to experience dementia ? Do I think I will know what's going on at age 93 ? That's my primary concern. In Texas property taxes can be frozen at age 65 for deferred payment upon death or sale of property. What bothers me most about reverse mortgages are the extremely high origination fees. 💸 💸 💸

A reverse mortgage is when you pay someone an exorbitant fee to slowly sell your house to the same person who is going to take it from you.

Why not sell the house and get a lump sum of 100% of your equity, reinvest in a safe albeit low rate of return and live off the amortized proceeds. Rent. You need not worry about taxes, insurance, maintenance etc. If you are a widow you do not need a house.

Wait a minute-- I do a reverse mortgage and get-- oh I don't know--- $150,000 and spend it on a 30 day vacation to Istanbul but don't pay my taxes or insurance on the house and you say it's a scam? Who's the scammer?

Taxes? They always take a cut. Taxes should, for the most part, be abolished. Only a certain privilege or activity should be taxable, period.

Reverse mortgages are a great idea in certain circumstances. The story in this video is not about reverse mortgages, it's about people not paying their taxes. The bottom line is, these sane people would've lost their homes regardless of the type of mortgage.

get a reverse mortgage went to pay it off and they went round and round the lawyer to keep it more longer to keep the interest rates going what a rip-off .... Thanks TOM

You still need to pay your taxes and insurance even when you don't have a mortgage.

It hurts listening to this because my mom did this Reverse Mortgage SCAM

the only responsibility the homeowner needs to do is to pay their own insurance and taxes which every homeowner is required to do

Dave Ramsey. Sorry Mr. Ramsey,but if you don't pay your property taxes and insurance on your home, you will lose it whether or not it has a reverse mortgage. Where's the scam, therefore, in the reverse mortgage???

What really galls me is why in world are these lower to middle class cash strapped retired people being forced to continue to pay property taxes on a home they've been paying taxes on for the length of the mortgage, in some instances the taxes collected equals the original price of the home. There needs to be a cutoff point somewhere that says they've more than paid their fair share. NEVER ENDING PROPERTY TAXES IS A WAR ON THE BLUE COLLAR RETIRED !

Losing your home at 92?The family who have tossed them into a home 15 years ago.

Seems like getting behind on taxes is a problem for reverse mortgages. The next question is, what happens if I don't do a reverse but still don't pay my taxes? If I end up in the same situation, then the problem isn't the reverse mortgage.....it's not paying my taxes.

Sounds like a housing version of a pawn shop.