AARP Sponsors Foreclosure Prevention Act
 Tuesday, March 18th, 2008

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On February 26th, AARP - the nonprofit, nonpartisan special interest group that claims over 38 million members and offers discounts to senior citizens - posted a petition in Care2.com's PetitionSite, in support of the Foreclosure Prevention Act (S. 2636), which will soon come before the Senate.  It asks Care2 members to sign the petition - a letter to state Senators, urging them to pass S.2636 - which would "allow families in bankruptcy to modify their home mortgages through the courts;" in particular Title IV.  In just 3 short weeks, the petition exceeded it's goal of 20,000 signatures:  as of March 18th at 8:48 pm, 21,049 Care2 members have signed it.

The phrasing of the Bill that's emphasized in particular is Title IV, "to emphasize...a commonsense solution that will help families save their homes without any cost to the U.S. Treasury, while making sure that lenders recover at least what they would have in foreclosure."    It isn't as if lenders don't also deserve to be protected - but is this a win/win bill for both the lender and the consumer, with that "at least" part thrown in there?

Do you think all 21,000+ of those people that signed the petition read the full petition, and the actual bill to Congress, or just thought:  eh, it looks good, home foreclosure is a problem.

I'm not advocating, nor opposing the bill - it's just worth pointing out that AARP may not exactly be an unbiased party in this equation.  They have an entire section of their website dedicated to reverse mortgages - in fact, it's the #1 search result on Google under "reverse mortgages."  AARP provides a wealth (for lack of a better word) of information and a "how much can you get?" calculator copywritten by NETirement.com, Inc., who also licensed the calculator to Wells Fargo Bank. 

AARP claims not to endorse any reverse mortgage product or lender; however, AARP is a carrier of Mortgage Insurance, Life Insurance, etc., and offer retirement investing through AARP Financial.

In 2003, investigative reporter Dale Van Atta--who has appeared in the LA Times, on FOX News, and is the author of Trust Betrayed: Inside The AARP--criticized AARP for betraying the memberships by lobbying against the best interests of its membership; and for supporting the Medicare Prescription Drug, Improvement, and Modernization Act, in an article entitled, "This Isn't The Old AARP."  BusinessWeek raised similar concerns over AARP's support for restructuring Social Security in 2005.

Could this be a case of a proponent for seniors' rights crossing nonprofit and commercial wires?  Or is this just an objective tool provided for AARP members (and nonmembers)?  And for organization(s) that don't endorse any specific carrier, why give that much publicity to reverse mortgages in the first place?

Reverse mortgages are high-cost loans that literally "reverse" (hence the term) the mortgage payments you've made in the past - but with a higher interest rate.  In other words, you are undoing your life's work.  The definition of a reverse mortgage is one in which a homeowner, usually an elderly or retired person, borrows money in the form of annual payments which are charged against the equity of the home.

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That's right, Gen X:  you're getting not getting the Baby Boomers' homes if they're giving them back to the banks. If bankruptcy is closer than the horizon, it could be a life raft.  If not, it could be giant mistake.  And with an unsure economy, it's easy to frighten people into hasty or premature decisions - and predatory lenders cater to just that fear.  Unless a senior citizen is already facing looming foreclosure and/or bankruptcy, the risks that come with reverse mortgages are far greater than the advantages.  The further I read, the more it reminds me of the ex-mortgage company employee who called into C-Span last month to warn that consumers aren't aware of the longterm costs of subprime mortgage loans.

It's so risky, in fact, that reverse mortgages insured by the Federal Housing Administration (FHA) require counseling to apply.  (Free HUD-approved counseling is available at 1-800-569-4287, or hud.gov here.)

According to ConsumerLaw.org, to qualify for a reverse mortgage, a person needs to be at least 62 years old, and own their home, and warn, "Better look before you leap.  While a reverse mortgage deal could put money in your hands, the transaction is likely to be quite confusing...[and] could also put a lot of your money in someone else's pocket."

Which leads me back to the petition for S.2636 in the first place, and why AARP is might be making such an effort to back it.  The bill, which was introduced by Senator Harry Reid (D, NV) on February 13th, 2008.  Title IV:  "Helping Families Save Their Homes In Bankruptcy Act of 2008," where "debtor" means the individual that owes the money.

This Bill would insert the following paragraph:
SEC. 412 WAIVER OF COUNSELING REQUIREMENT WHEN HOMES ARE IN FORECLOSURE.  "[Waiver Of Counseling Requirement] shall not apply with respect to a debtor who files with the court a certification that a foreclosure sale of the debtor's principal residence has been scheduled."

i.e.:  If a person has received a foreclosure notice, they can waive the requirement by law to be counseled on risky decisions like above-mentioned reverse mortgage(s).  Does everyone win?  Maybe - if the debtor has no other options, and would otherwise default; but would they be well-counseled first on the potential negative impact of such weighty decisions, and what their options actually are?  Which is why the requirement is there - to provide sufficient free advice for consumers to make well-informed decisions.  Yes, it may be somewhat of a catch-22.

This isn't to say there aren't many positive, favorable aspects to this Bill--and I'm not here to tell you what to think.  Here is the full text of it.  So far, the proposed Bill is at it's first stage:  it's been introduced but has not yet been voted by on the Senate, nor the House (if passed in both, the Bill would next go to the President...how a Bill becomes a law...the part where eyelids got heavy in History class).  I know, I know:  that's what we have Senators for.  But it can't hurt to voice your opinion to them once in a while...they are public servants just as you and I are.  When we treat them like detached royalty instead of pillars of society, that's when they represent power...instead of us.


1.  Read it.
2.  Write down what you think of it.
3.  Copy and paste it to someone who's vote on it matters.
4.  If you've read down this far - KU-DOS!  I hardly did!  Aren't politics fun?  And if you've still got it on your clipboard, paste it as a comment below, to tell everyone what you think!

Retraction:  3/19/08 This article previously confused Ibis Capital, LLC with IBIS Capital.net. The two are not affiliated, and this portion of the article has been removed.

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