Banks target smart homeowners with stupid products

The unchecked use of homes as ATM machines has left many home owners in the uncomfortable position of being former home owners.

Now that they're out equity and have little left to be milked for fees and interest, the big banks have turned to another group: people who have been responsible, paid off their mortgages, and preserved their equity. The New York Timesreports that the big banks would "love to serve" these people.

Will isn't that just dandy. Having spent the past decade reporting huge profits (and then huge writedowns) helping financially unstable people get themselves into bigger trouble, the industry is now looking to move on to the more responsible borrowers.

To be sure: some retired people who own their homes outright do need to tap into the equity to provide for living expenses. But as I wrote back in March, retirees need to proceed with caution, especially when it comes to reverse mortgages.:

There's a reason salespeople love these products -- and therein lies the problem. One elderly lady quoted in the New York Times piece paid an up-front fee of 8% -- $17,100 -- out of the initial proceeds of the loan. And the independent counsel that people are federally-required to receive before closing on a reverse mortgage appears to be a total joke --oftentimes it's paid for by the lender making it, by definition, not independent.