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Older Americans and the CFPB


May is Older Americans Month. In his proclamation for the month, President Obama spoke of honoring the contributions older Americans have made and will continue to make:

Having lived through many of our Nation’s most challenging times, older Americans have shaped the story of America and secured the promise of our future. We are privileged to recognize these treasured citizens during Older Americans Month, and honor both the impact they have made and their accomplishments yet to come.

Older Americans face wide-ranging circumstances that may be familiar to anyone. Some are at the height of their careers; some are retired. They may be paying for their children’s education, moving into new homes, or paying off debts.

However, it is important that we remember that older Americans also face some unique financial opportunities and challenges:

  • Many older Americans live on fixed incomes with limited savings to cover unexpected medical or other expenses. People need access to reliable and relevant information and advice to help make their savings stretch farther.
  • Unfortunately older Americans are often the targets of investment scams such as Ponzi schemes and illegal offshore investments. Knowing how to spot “fraudsters” can often be challenging, especially when they have been referred by a friend or family. The CFPB has been charged with helping to educate older Americans to avoid unfair and deceptive practices.
  • Americans aged 62 and older are eligible for reverse mortgages. If you are over 62 and own a home, you can borrow against the equity of that home in small amounts over time. Repayment is due when you no longer own the home or are absent for 365 days. This can help create a steady income during retirement, but it creates a large debt load. Reverse mortgage borrowers need to understand and be prepared for that risk.

The people just now reaching their sixties are part of America’s largest-ever generation of retirees. The CFPB is creating an Office of Financial Protection for Older Americans to ensure we serve this large community effectively.

This Office will connect seniors with what they need to guide themselves through their financial lives. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires this Office to be active by January 21, 2012. We are building it right alongside the rest of the consumer bureau, and in the coming weeks and months you’ll hear more from us about financial issues for seniors.

Here are some places you can go now for senior financial protection information:

The theme for this year’s month is “Older Americans: Connecting the Community.” To learn more, visit the Administration on Aging’s page dedicated to Older Americans Month.

  • A.M.Pierce

    This is a fantastic article and as a Gerontological Social Worker, I will find the included resources very helpful, especially in my Elder Care Consultation work.   Thank you.

  • Michael Jones

    As a Reverse Mortgage Specialist I thank you for mentioning this as an option for Seniors. I want to clarify your comment regarding the large debt load. When the loan becomes due, it does need to be paid off with the sale of the home. If the loan balance is larger than the proceeds from the sale of the home, the borrower or the borrower’s estate is not required to make up the difference. It is a non-recourse loan. This fact does help to mitigate the risk to some degree.

  • Anonymous

    Senior homeowners may die before they receive all of their home equity under the Dodd-Frank Act.  The act requires any homeowner who sells their property using an installment sale, known as owner financing, seller financing or seller carry back, to fully amortize the installment sale note.  It does not allow any balloons to be negotiated between buyer and seller in the note.  This means if you are 55 or older there is a good chance you will die before that 30 year note pays out. 

    Part of the purpose of the Dodd-Frank Act is to protect seniors who use or invest in financial products.  The Federal government chastises insurance companies for the deplorable practice of selling seniors 30 year annuities because Ma and Pa will die before they receive their money.  Yet, the Dodd-Frank act does the same thing when it mandates that you cannot receive all of your equity for 30 years.  Just shortening the amortization period does not help either.  How many buyers can afford the monthly payments on a ten or fifteen year amortization? 
    Private property owners have been swept into the regulations of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act which was signed into law in July 2010. Owner financing will be regulated in Title XIV Section 1401(2) (E) Mortgage Loan Origination Standards. The law restricts private property owners who want to sell their own property using owner financing (installment sale).  Some seniors bought property with the intent to sell it on an installment sale to supplement their income in retirement.  They choose to receive their equity in installments instead of cashing out because they don’t want to invest it into 1% CDs or the stock market that lost 40% in recent history. In this tight lending environment an installment sale is sometimes the only way they can sell their property. 

     This law was to protect seniors and it ends up restricting and punishing them as an unintended consequence.  If they don’t know the law and negotiate a balloon they are then subject to criminal charges and hefty fines.  Negotiating a balloon that is due 10 years into the contract is not preditory lending.  Seller financing should be removed from this act.  Ma and Pa on Main Street do not sell their property as a business and they were not responsible for this financial crisis. 

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