Title
Authorizing the Council Committee on Public Health and Human Services to hold hearings regarding reverse mortgages.
Body
WHEREAS, According to CNN and the Employee Benefit Research Institute’s 2008 Retirement Confidence Survey, only 18% of workers polled were very confident about saving enough money for a comfortable retirement and according to the Washington Post and a recent Ernst & Young study, nearly three out of five “middle-class retirees” will probably run out of money if they maintain their pre-retirement lifestyles and will have to reduce their standard of living by an average of 24% to minimize their chances of outliving their financial assets; and
WHEREAS, Many Americans fail to properly save for retirement and have even less confidence in their retirement savings and the U.S. economy in light of the approximate $700 billion proposed federal bailout of various financial institutions due to subprime and other mortgage products that were bundled into novel and exotic Wall Street investments; and
WHEREAS, Philadelphia is a city of neighborhoods and maintains a population of property owners that enable this City to have one of the country’s highest homeownership rates and, for these homeowners, the majority of their net worth is comprised of the equity in their homes; and
WHEREAS, Considering these financial concerns, many Philadelphians and other citizens are looking to the equity in their homes through reverse mortgages as a means to provide additional retirement income; and
WHEREAS, A person who is 62 years or older, owns their own property or has a small remaining mortgage balance, resides in this property as their primary residence, and receives counseling from a HUD approved counselor, may receive a reverse mortgage, which is a loan from a HUD approved financial institution; and
WHEREAS, Unlike an ordinary home equity loan, a reverse mortgage does not require repayment as long as the home is the borrower’s principal residence and lenders recover their principal, plus interest, when the home is sold and the remaining value of the home goes to the homeowner or to his or her survivors and if the sales proceeds are insufficient to pay the amount owed, HUD will the pay the lender the amount of the shortfall; and
WHEREAS, Considering the current state of the U.S. economy and the near collapse of the subprime mortgage and loan industry, various consumer advocates and housing counselors are concerned that predatory lenders are moving into the reverse mortgage industry in order to strip the equity from senior homeowners through high interest rates and fees; and
WHEREAS, In light of Philadelphia’s and this body’s role as a municipal and legislative leader in the area of consumer protection in the financial services industry by being an early advocate against predatory and payday loans, it is important to investigate the reverse mortgage industry to prevent Philadelphians from becoming potential victims; now therefore, be it
RESOLVED, BY THE COUNCIL OF THE CITY OF PHILADELPHIA, That the Committee on Public Health and Human Services is authorized to hold hearings regarding reverse mortgages.
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