Housing counselors are upset with new administrative rules within the Department of Housing and Urban Development that make it hard to advise their clients.

For years, people seeking reverse mortgages have been obligated to get counseling. Many of the lenders involved in reverse mortgages are the same as the lenders that participated in subprime lending.  What’s worse, marketing for these mortgages often uses affinity spokespersons that play on the trust of borrowers.  In Kansas City, for example, one lender hired a now deceased Negro League baseball star.  Some even call reverse mortgages a form of subprime lending.

The requirement for counseling is linked to the concern over the populations that utilize these instruments.  Reverse mortgages appeal to retired people who have more home equity than cash.  Reverse mortgages allow seniors to stay in their homes, but to tap the built-up equity in their homes.  In such a mortgage, the lender gives the resident a monthly cash payment in exchange for the right to residents title.  The lender assumes the title upon the death of the resident.  It is a risk, because consumers may end up trading their equity for just one or two years of payments.  It is also a risk (more…)

The plain vanilla mortgage, once a stunning bit of common sense that has emerged in a sea of financial obfuscation, is now a policy proposal of the past.

Barney Frank dropped the Obama Administration’s plain vanilla language in the Consumer Financial Protection Act Tuesday.

Many writers, approaching this issue from a behavioral economics perspective, saw a lot of merit to this idea.  Richard Thaler, who studies how people make financial decisions, called it “mortgages made easy.”The logic of his viewpoints are neatly expressed in this (more…)