Retirement Rip-offs: Bad Investments Take Advantage of Good People

Tampa, FLThe need for Americans to take good care of their own retirement investment strategy has given birth, not surprisingly, to the huge industry financial planning and investment industry—not to mention investment products that promise high returns and low risk.

However, all to often things are not as they seem, and the tragedy of a senior facing huge losses in an investment portfolio, or equal losses in equity to meet payments, is that in your sixties, seventies or eighties it is virtually impossible to recover.

It's not like you can go back to work again, to make up the difference. You may want to start over; you may financially need to start over. But your health, and the employment market may not let you.

At issue are various mortgage-backed products out there that are, or have allegedly been sold as good-performing investments that are in reality dying on the vine in tandem with the sub-prime mortgage meltdown.

You know all about the sub-prime mortgage debacle, where lenders played fast and loose with the rules of common sense and opened up the vaults for borrowers the big banks wouldn't touch. They not only enticed cash-strapped borrowers on the outer limits of the credit universe with money, they reeled them in with attractive interest rates that seemed too good to be true.

In most instances they were, in that they were designed to increase dramatically in a year, or two, or three. Yeah, but that's three years down the road, the borrower would say—we can finally buy this house NOW!

Well down the road is here, and suddenly borrowers are looking at their interest rates going up, and their payments going up at the same time that the value of their investment is sinking.

So many, have just walked away.

Thus the eagle of opportunity has come home to roost, if there even is a home to come back to. Not only is the housing market in the doldrums, but investment products tied to those failed mortgages are also feeling the heat.

The ripple effect started when many of the mortgages were converted into short-term debt notes, which were then resold to other companies, including hedge funds looking for a higher rate of return than the yield from conservative, but more secure bonds.

A high rate of return is attractive for any investor, so long as the risk tolerance fits. And for most, given the traditional mom-and-apple-pie security of real estate and the housing market, investment products containing mortgage-backed securities seemed a safe bet.

Now, all bets are off. Given that dozens of companies have vended investment products heavily weighted in mortgage-back debt...some upwards of eighty per cent...the consequences looming for those investors with such products in their portfolios appear dire.

Especially given that some of those investors might be seniors.

Some have found themselves victims of the unscrupulous mortgage lenders directly.

Last year, lawyersandsettlements.com brought you the story of Janis and Victor, a retired couple living their dream in Florida. Their home was paid for, and they had complete control of the nearly three-quarters of a million dollars worth of equity in their home. Thank goodness for that, as Victor was not a well man.

Their problems started when an ad popped up on Janis' computer screen—a promotion for a surefire investment opportunity that in the end, turned out to be worthless. The perpetrator closed up shop and ran off with their money and that of Janis' own mother. With accrued interest, the loss was very nearly what their home was worth.

To survive, Janis and Victor needed to re-finance. Which they did, by way of a sub-prime mortgage lender they found on the Internet. Sure enough, the rates were attractive going in, but they soon went up. Despite making payments, their principal was actually rising, rather than dropping.

At last report they were trying to re-finance again. Meanwhile, their relationship with the current lender had resulted in 62 inquiries to their credit history (they had authorized only four), a credit history that by this time was in shambles. A year ago they reported that they had just over $200,000 equity left in their home. "But the (housing) market is soft down here," Victor had said.

That was before the sub-prime mortgage meltdown. It is reasonable to assume that today the retired couple has lost the equity in their home, and are struggling to make payments on what is probably a huge debt pushing $600,000. Their home—if it were even to sell at all in the midst of the current housing crisis—would likely yield far less than what they owe.

Thus, in just a few short years, a retired couple that had done everything right in their lives and were living their dream, were taken to the cleaners and ripped off by greedy opportunists.

Know what you're buying. Know what you're signing. And if somebody has sold you a bill of goods, fight back.

They would...