What Is CAARMA?
Consumer Advocates Against Reverse Mortgage Abuse (CAARMA) is a 501(c)(3) nonprofit organization that seeks to reform the reverse mortgage system in the United States. Reverse mortgages allow for people 62 or older to take out loans secured against their home equity. They can receive the loan as a lump sum, a series of regular monthly payments, or a line of credit. They don’t have to pay down the mortgage every month, as with a traditional mortgage. Instead—as long as they pay homeowners insurance, taxes, and keep the home in good repair—the loan only becomes due when they sell the house, move out of it, or die. At that point the loan must be paid back in full, along with interest and fees, either by the homeowner or their heirs. Unfortunately, this often can be done only by selling the house.
Consumer advocates see the system as ripe for predatory lending and scams that take advantage of older people, who may not be able to understand the terms of the loans they’re signing. It can also adversely impact their heirs, who may lose their expected inheritance due to no fault of their own.
CAARMA says that it exists to make the home equity conversion mortgages (HECM) program run by the Federal Housing Administration (FHA) “suitable, safe, and smart.” HECMs are federally insured and the most common form of reverse mortgage in the United States. CAARMA ultimately wants to reduce the number of HECM foreclosures and make the FHA’s Mutual…
