Barney Frank Does Not See Parallel Between Reverse Mortgages and Subprimes

By Marty Bell

Appearing on the AARP-produced cable television program, "Inside E Street," Congressman Barney Frank (D.-Mass.), chairman of the House Financial Services Committee and probably the elected official best informed about, and most experienced with, reverse mortgages, told host Sheila Kast he does not see the parallel between reverse mortgages and subprime loans.

"In the first place, in the subprime case, people are obligated to make payments. In this case, people are receiving funds," Congressman Frank said. "In the subprime case, as the values of the houses dropped, some individuals were hurt because they couldn't refinance. In the reverse mortgage case, it would fall on the Federal government, as it should, because this was a national economic problem, not an individual fault.

"The evidence and the results have been very different. I would invite people to read about this. No one has talked about a reverse mortgage crisis. It has been subprime loans that should not have been granted that caused the problem. I don't think we have heard of reverse mortgages being given for more than a property's worth. And you don't have the problem of people taking out loans that their incomes won't support. That simply is inapplicable to the reverse mortgage."

When pressed by Kast on whether a crisis could happen in the future, Frank responded, "The fact is we've had reverse mortgages for as long as we've had subprimes and the reverse mortgages have not been a cause of the crisis and the subprimes have been."

To view the complete Inside E Street broadcast, please click here.