Credit: (Deirdre O'Neill) / CC BY-SA 2.0
“Presume not that I am the thing I was,” wrote William Shakespeare in the play, 2 Henry IV, reminding us that nothing stays the same.
On the personal side, we all change over time; our families and our other assets grow and shrink.
On the business side, entities both small and large come and go; Internet and technology companies appear out of nowhere and just as often disappear into cyber-obscurity; and the economy has a mind of its’ own. In the wake of the global financial crisis that began in 2007 and the collapse of so many financial giants, it is no surprise that the reverse mortgage industry has recently undergone a major shakedown.
For the past five years, I have chronicled the reverse mortgage industry – starting when its popularity was peaking back in 2007. I exposed two major problems in 2010, leading me to conclude that I could no longer, in good-faith, remain a supporter of the reverse mortgage. Those two problems I shall refer to as the “competency problem” and the “expense problem.”
This week and next week I will add two more articles to my continuing series on reverse mortgages. This week I will explain how the Farr Law Firm has taken steps to help clients get around the “competency problem,” and next week I will provide an update that may signal an end to the “expense problem.”
Here’s a summary of, and links to, my previous articles in this series:
- I praised reverse mortgages in 2007 as a viable way for seniors to remain at home as long as possible in my article, Reverse Mortgage Home Equity Loans.
- I viewed reverse mortgages as an excellent choice for various reasons, explained in detail in my early-2010 article, Using a Reverse Mortgage to Pay for Home Care.
- By mid-2010, I wrote about what I perceived to be discrimination in the lending industry I completely explain why that was such a nefarious issue to my clients and the elderly at-large in the article, Huge Problems with Reverse Mortgage Industry.
- Merely a few months later I found myself writing about the “expense problem” in, Reverse Mortgage Rules Changing Again , noting Congress’ plan to increase HUD’s Mortgage Insurance Premium.
- In February, 2011, I reported on the fact that one of the reverse mortgage industry’s largest lenders, Bank of America, had dropped out of the reverse mortgage business in No More Reverse Mortgages, Announces Bank of America.
The “Competency Problem” Persists: How The Farr Law Firm is “Combating” This Issue
"Combating" the "Competency Problem"
After interviewing dozens of reverse mortgage lenders, it became readily apparent that it is practically an industry guideline to refuse to honor the Power of Attorney (POA) presented for use in connection with obtaining a reverse mortgage: it is systemic. I first discovered this travesty when two of my own clients were sent on scavenger hunts for documents certifying the applicant’s competency when the POA was signed, and a second document certifying the applicant is now not competent, both to be completed by the applicant’s doctor.
I described why these steps were creating an “insurmountable roadblock” for some clients in detail in my May 5th, 2010 article, Huge Problem with Reverse Mortgage Industry, because I believed then – and still do today – that these practices are not only unfair, but illegal and discriminatory. However, because of this unfair practice, the Farr Law Firm has made adjustments to its’ Incapacity Planning services in order to help our clients navigate these obstacles.
How is the Farr Law Firm Helping?
When our clients come in to sign their Incapacity Planning documents (including their POA), we provide them with an Affidavit of Competency to give to their doctor to certify competency as soon as possible after the document signing, thus satisfying the first major “competency” hurdle. Of course, it is the responsibility of the client to actually go to the doctor and get the affidavit signed, but having the affidavit ready to hand to the doctor to sign helps the client get it done.
For clients with borderline competency who might wind up needing to use a reverse mortgage, we provide them with an Affidavit of Competency for their doctor to complete prior to the document signing.
Why Reform is Still Needed
Most people want to remain at home, as long as possible, before entering a nursing home for long-term care. A reverse mortgage is a great tool to accomplish this desire, because in most cases significant in-home health care will become necessary at some point. In-home caregiving is not cheap, and thus adequate funds are needed to ensure one can be hired. Although our firm has taken steps to get around the “competency” hurdle, most attorneys have not, and even though our current efforts will be helpful for clients signing our documents today, they are no help for clients who come to us or other attorneys with an old POA and no Competency Affidavit. So once again, I implore you to visit HUD’s Housing Discrimination Complaint Website and file a “lending discrimination complaint” if you believe you have experienced discrimination. If enough people cry foul, perhaps HUD will outlaw arbitrary, harmful “scavenger hunts.”
Stay Tuned for Next Week
Next week I will provide an update that may signal an end to the “expense problem.”
Image Credits:
“Combating” the “Competency Problem” – Free images from FreeDigitalPhotos.net
About Evan H Farr, CELA, CAP
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