Why Reverse Mortgages Need Mortgage Insurance

SeniorReverse mortgages have proven to be a great help to many seniors in recent years and it looks like they will continue to help many more in the future. Among other great features that they have, a reverse mortgage enables seniors to have a cash flow even when everything else is experiencing difficulties due to economic stress.

Reverse Mortgage Money Is Guaranteed to Be Available

The HUD reverse mortgage program, called Home Equity Conversion Mortgages (HECM’s), offers a guarantee on these loans that most other companies do not offer. Recent days have seen many people with HELOCS find out that no more money is available to them. Their money has been frozen, even though it was supposed to be available when they wanted to withdraw it.

HUD’s program, which is made available as an FHA reverse mortgage, has a guarantee on it to ensure that seniors who have a reverse mortgage through them will be able to get their money when they want it. This means that your money is secure even if the company that actually gave you the loan goes out of business.

Mortgage Insurance Fees Are Charged

The money needed to cover this expense is taken out in a upfront 2% charge – the mortgage insurance premium (MIP). It is a reverse mortgage rate that is set by the government and is 2% of the total value of your home. In addition, there will be a monthly charge of 0.5% in order to maintain the cost of your mortgage insurance.

The main reason for these charges is because the government does not subsidize the HECM program. It is the money that comes from each reverse mortage owner that covers the costs. If your home should decrease in value, or if you live longer than expected, it will be money from these charges that will make up the difference.

Mortgage Insurance Prevents You from Paying More than the Home’s Value

Besides insuring that your money will be there, it is this money that will also make sure that the amount owed when it is due is not going to cost you more than the value of your home. This protects you and your relatives – no matter what happens to the value of your home. Be aware, however, that this guarantee is only for government HECM’s.

The mortgage insurance premium provides you with the assurance that your money will be there. You never need to be concerned about making a payment on it, either, because the 2% is taken out when you get the reverse mortgage, and the rest is subtracted from the total amount available. This means you never have to make a payment while you are living in your home.

Reverse Mortgages Require No Payment While You are in Your Home

The only concern that you will have while you are in the home is to make sure that the normal bills
on the home are taken care of. You are responsible to pay the utilities and taxes, and you must also maintain it, too. As long as these are taken care of, you can live in it as long as you need it.

Reverse mortgages make a lot of sense for seniors who need to ensure that they have a larger cash flow than what social security can provide. It can help you to stay in your home, too, and help you with monthly payments. To see how much you might be able to receive, a reverse mortgage calculator can give you an estimate.

A thirteen-year veteran of the mortgage industry, Robert Griffin specializes in reverse mortgages and has helped over 3000 Americans find financial security with a reverse mortgage. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of “62 Senior Moments.” If you would like more information, please call (866) 683-3690 or visit our website to research a Reverse Mortgage Lender.

Source: Examiner

5 Ways to Ruin Your Credit

Improving your credit score takes some elbow grease. Ruining it, on the other hand, is a piece of cake.

Just a few false moves, and in no time, your credit reputation starts to suffer. It doesn’t even need to be something extreme, either. Just a late bill payment here or a retail splurge there is all it takes. Woe to the consumers who make a few missteps in a row and find themselves slogging through suboptimal loans (high rates, high fees) the next time they’re shopping for credit.

The surest way to be blacklisted is to break the rules that matter most to the very folks measuring your creditworthiness. Here are the five key gotchas and some ways to stay in the lending world’s good graces.

1. Forget to put the check in the mail. Hey, it happens — you’re on the lido deck during your family getaway, and — doh! — you remember that the credit card payment was due three days ago. No big whoop, right?

Actually, you are right … to a point. Credit card companies actually do have a heart (or at least offer a little leeway), and they’re willing to let a few missteps slide, particularly in how they treat 30- and 60-day late payments that are brought up to date right away.

Still, if you make a habit of it, prepare for some brutal consequences, since one-third of your credit score — the most popular being the FICO score from Fair Isaac — is based on your bill-paying habits. According to Credit.com, a single 90-day-late payment is as damaging as a bankruptcy filing, a tax lien, a collection, a judgment, or a repossession.

The lesson here is simple: Pay your bills on time. Don’t skip any bills — and certainly not your rent or your mortgage payment. Send in just the minimum amount due, if you have to, but send it in. If you know your payment will be late, call your lender and explain, and he or she might give you a free pass, just this once.

2. Spend up to your credit limit. You’ve earned it, right? After all, a bunch of bankers in suits have deemed you worthy of a spending limit of $5,000, $10,000, $20,000, or maybe even $40,000 or more on your credit cards. Financing a Bugatti has never seemed so within reach.

Back to earth, Trump wannabe. Sure, you might have a $15,000 credit limit on your card, but that doesn’t mean that’s how much you can afford to spend. Even a temporary splurge could turn into long-term debt trouble if you’re not careful. Just ask Michael Jackson.

Keep those cards in your pockets and avoid coming anywhere near maxing out your credit cards. The measure of debt to your credit limits counts for a whopping 30% of your overall credit score. Our advice is to keep your debt to below 10% of your limit — and you are paying the bill off every month, right? If you can’t handle that, keep in mind that around 30% is “acceptable” to the banking world, and that red flags start waving when your debt-to-available-credit ratio exceeds 50%.

3. Dismiss your youthful indulgences. You may want to deny your past — that Limited Express charge card you used so often during college was so long ago.

But that’s the point. The longer your borrowing history — particularly if you’ve been a responsible, card-carrying citizen — the better your score. Too many people cancel old credit cards when spring cleaning their wallet, and then are shocked when it affects their credit score.

The length of time you’ve spent in the system determines 15% of your overall score, not to mention the impact of closing lines of available credit that factor into your debt-to-credit ratio mentioned above.

Celebrate and retain your credit history. If you’re going to cancel some credit cards, start with newer accounts, since the old ones help establish your long and illustrious credit record.

4. Sign up for a better card. And then sign up for an even better one. Given the number of credit card solicitations mailed out each year, it seems that everyone is in line to win the plastic popularity contest. Playing the field is tempting, and sometimes you should. If you’re trying to pay off debts, shopping around for the best deal makes sense. Most of the time, though, you should stick with what’s in your wallet.

Lenders like loyalty. Think about it: If you lent someone money, you’d probably get nervous if that person started asking all of his or her other friends for a loaner, too. Lenders check your credit file regularly to see whether you’re dating around. (New credit applications affect 10% of your credit score.) If they see you applying for lots of credit at once, they tighten their purse strings and fire a few warning shots at your credit score.

Also keep in mind that every line of credit you apply for will stay on your record for at least seven years, even if the account is open only for a day or two. So take great care when opening and closing accounts.

5. Grease a few palms to get ahead. Dressing to impress and picking up the happy-hour tab are classic tools to get ahead in some circles. So you may wonder whether there’s a way to buy your way to better credit.

There’s something to be said for variety. Those with perfect credit scores have a demonstrated history with a variety of loans — such as installment loans, like a car loan or mortgage, and revolving debt, such as your workaday credit card. Types of loans affect 10% of your overall score.

The problem with trying to quickly add variety to your borrowing portfolio is that doing so may put you in a worse situation than where you began. Remember, when you apply for loans, you’ll experience a short-term drop in your score. And then there’s the money — paying interest or annual fees or other costs of borrowing just to add some cards to your credit portfolio.

Don’t borrow money just to boost your score, and for heaven’s sake, don’t believe anyone who tells you that you have to carry a balance on your cards to prove your creditworthiness. That’s bunk.

There are just two things that are guaranteed to boost your credit score:

1. Time. (Remember, most bad marks fall off your report after seven years.)

2. The proper use of credit. (Responsible bill-paying habits matter most to those judging you.)

Source: Mint

Refinance Home Loan Rates – Save Money on Your Mortgage

Refinance home loan rates have reached levels that many home owners are finding to be quite attractive. To save money on your mortgage, refinancing at a lower mortgage interest rates is a great option. The conventional 30 year fixed mortgage rate is well below 5% and has been below the 5% level for over a month now. By locking in at these current levels you could end up saving hundreds of dollars on your mortgage payment.

For much of the summer we saw mortgage interest rates above 5%. The reason that mortgage rates were above this level was because the 10 year treasury rate yield was finishing its up trend that lasted for over half the year. Once the 10 year yield rolled over and started heading lower we saw mortgage interest rates start to work their way back down to below 5%.

If you have been thinking about refinancing now might be as good of a time as any. The 10 year yield has been in a down trend but has recently hit support at the 200 day moving average and has moved higher. If this move turns into a long term trend there is a chance that mortgage rates could see higher levels very soon.

The Federal Reserve Bank has been working very hard to keep the 10 year treasury rate yield lower which would keep interest rates low. The problem we are now facing is that the Fed is going to take their hand out of the pot and they are going to stop buying US Treasuries by the end of October. It is great the the government is allowing the market to set interest rates but they might have made it much worse by pushing down rates artificially.

With this in mind, going through the mortgage refinance process right now would be a good choice. If you continue to wait for mortgage rates to drop you might wait a little bit too long and see mortgage rates closer to 6% than 5%. There are many companies that are still advertising mortgage rates below 5% so do your homework and find out if these lenders will work out for you.

Please check out our unemployment forum where we encourage you to post comments below whether it be a strategy you used to get a job, possible tips or links to those who are unemployed or even a rant about your previous employer and how they laid you off. Anything goes as long as there are no obscenities or direct insults to other posters.

Source: Subprime Blogger

How Much Money Can I Receive from a Reverse Mortgage?

When comparing reverse mortgage loans, it’s important to look at how much cash you can actually get over the life of the loan. The amount you receive depends on how you take the money.

Lump Sum Payout

You can choose to take the cash from a reverse mortgage as a lump sum payment. The money can be spent however your choose, including for household repairs, medical expenses, or travel. You also could choose to invest some of the proceeds in an interest-bearing account such as a certificate of deposit if you want the balance to grow.

Reverse Mortgage Line of Credit

If you take proceeds from a reverse home loan as a line of credit, there are a couple things to keep in mind. First, if you have a flat credit line, each time you take a cash advance the balance will decrease. Second, if you have a growing credit line and withdraw cash, the remaining balance will increase based upon the interest rate associated with the account. Let’s say you start out with a $100,000 credit line that grows 6% a year. Anytime you withdraw money from the credit line, the remaining balance can continue to earn interest at the 6% rate. So you could end up earning more money over time.

HECM Reverse Mortgages

The Home Equity Conversion Mortgage (HECM) has a credit line that continues to grow as long as there is credit left. Although the maximum loan limit is $417,000 depending upon your age and house value, being able to earn interest on a credit line could increase the overall amount you receive. But not all reverse mortgages offer growing credit lines, so ask your mortgage broker if any loans being offered have this feature before signing up.

Source: Best Reverse Mortgage

Abuses Occurring in Reverse Mortgage Market

By Stephen J. Baetge
Staff Writer

A new report issued by the National Consumer Law Center (NCLC) finds that abuses and abusers from the subprime mortgage industry have made their appearance in the reverse mortgage market, raising concerns that the equity and savings of millions of seniors may be at risk by the same forces blamed for causing the current recession.

A reverse mortgage is a mortgage in which a homeowner, usually an elderly or retired person, borrows money in the form of annual payments, which are charged against the equity of the home and are used by many seniors to help ease their financial burdens.

A new NCLC report, “Subprime Revisited: How the Rise of the Reverse Mortgage Lending Industry Puts Older Homeowners at Risk,” has found that subprime lenders have entered the reverse mortgage market.

These lenders and their unscrupulous predatory practices are considered a danger to the financial well-being of America’s seniors.

“In the reverse mortgage market, seniors face some of the same aggressive lending practices that were common in the subprime lending boom,” stated the report’s author, Tara Twomey, an NCLC attorney. “Well-funded marketing campaigns and perverse incentives to brokers are targeting seniors’ home equity and using reverse mortgages as their tools.”

The reverse mortgage market is booming at a record pace despite the recession. Annual reverse mortgage volume has topped 110,000 units and $17 billion, with top banks like Wells Fargo and Bank of America and large insurance companies like Genworth and MetLife leading the way.

The increase in the reverse mortgage market combined with the slowdown in other home lending has attracted those interested in making a fast buck with other’s footing the bill.

The NCLC report states, “Many of the same players that fueled the subprime mortgage boom — ultimately with disastrous consequences — have turned their attention to the reverse market.”

Predatory lenders — including some of the nation’s largest banks — now view the reverse mortgage market as a source of profits that have dried up elsewhere.
Among the threats listed by NCLC are mortgage brokers looking for a new source of rich fees and those who once reaped profits from exotic loans who are now focused on wresting more wealth from vulnerable seniors.

Another detrimental practice found to be on the increase in the reverse mortgage market industry is securitization, which allows subprime loan originators to disassociate themselves from the downside risks of abusive lending.

The report drew an immediate response from lawmakers, who called for regulatory improvements to protect seniors against predatory practices in the reverse mortgage industry.

“We’ve seen this movie before, and it didn’t have a pretty ending. Abuses in the subprime lending market almost brought down our economy,” observed U.S. Senator Claire McCaskill, D-Miss. “Now we’re seeing similar abuses with reverse mortgage lending — something needs to be done before more lifesavings are depleted and more tax dollars are drained.”

McCaskill has authored a law to strengthen consumer protections against predatory marketing practices within the reverse mortgage industry and is introducing new legislation to improve regulations over the government’s role in reverse mortgage lending.

NCLC’s report details numerous problems resulting from the growth of an aggressive and dangerous reverse mortgage sales culture that has outstripped the limited resources and uncertain funding for the counseling agencies that current laws rely on to prevent reverse mortgage abuses.

“We urgently need stronger protections for reverse mortgage borrowers, especially a suitability standard that obligates those who arrange and profit from reverse mortgage deals to seek to avoid harming the financial interests of elderly clients,” said Twomey.

The report calls for the extension of reverse mortgage protections to all equity conversion products aimed at seniors, a prohibition on yield spread premiums and prevention of questionable broker incentives in the reverse mortgage market.

It also suggests better data collection by lenders to allow them to more effectively meet their clients’ needs.

“Reverse mortgages are complicated and expensive financial products that must be used wisely and regulated carefully, or profit and volume driven sales efforts can open the door to abuses and fraud,” said NCLC attorney Odette Williamson.

The report also found an increasing danger from the use of reverse mortgages as tools in schemes to steal the home equity of unsuspecting seniors or to fund the purchase of expensive insurance and financial products that pay high commissions to the sellers.

Source: Senior-Spectrum

Reverse Mortgage May Stop Foreclosure

Sunday, October 11, 2009, 07:25 PM
Posted by Administrator

If you are facing repossession, coming up with a once a month home loan payment may appear an insurmountable problem, particularly if you are retired with limited cash coming in. The solution could be right in your house, thru the careful use of a reverse mortgage.

Unlike a regular mortgage, which demands that you pay back a bank for a loan to get a house, a reverse mortgage is a loan to you that’s secured by the value of your home. The loan is usually paid back, with interest, from the proceeds when you or your heirs sell the house.

The minimum age to be accepted for a reverse mortgage is 62. But the older you are and the larger the value of your house, the more that you can borrow which might be the key to saving your house from foreclosure. A widow with a girl in college had been wrestling to maintain her home. She agreed to borrow $121,450 in a subprime mortgage, and used some of the cash for new gutters and other repairs. But the advantages of the loan were overweighed by the heavy regular payments, which gobbled up almost all of her revenue.

She slipped behind on her payments, and her home was slated for foreclosure in Apr 2008. That is when the Home Defense Program of the Atlanta Legal Help Society, stepped in. First, they swayed the mortgage servicing company to accept a payoff of $100,192, about $40,000 less than it was owed including late charges and penalties.

Then they organized a reverse mortgage on the home, which was worth $179,500, so she could make the payoff. Reverse mortgages could be a lifeline for older house owners who can’t benefit from the foreclosure prevention plan expounded by the Obama administration, which, with similar plans, is focused on whittling home loan payments to about 1/3 of a borrower’s gross revenue. Such plans don’t help seniors on small fixed incomes who could not pay a once a month bill whether or not the interest rate were slashed.

An advocate has to help the house owner begin the process of getting a reverse mortgage, while at the same time working to stop foreclosure action and most likely convincing the bank to accept a payoff that is less than what’s owed. When details of a loan are obviously illegal, violating rapacious lending laws that were in place when the loan was made, one of the first routes is to work out if a suit can be brought against the lending corporation, saving the senior’s home that way. Many loans are not technically illegal, but it is apparent that they should not have been made to an older person on a fixed earnings. The second hurdle is preparing the reverse mortgage itself. Historically, these loans are used to give folks with almost no mortgage debt a one-off sum or monthly revenue to pay costs while they live in their home. The older the homeowner and the bigger the home equity, the additional money a reverse mortgage will yield. But when there is a large mortgage, mixed with today’s dropping home costs, the house owner might have very little equity. In that position, a reverse mortgage can be tough to get.

Why not a reverse mortgage? Even for people that qualify, reverse mortgage loans are not always the best option. They are awfully costly because the majority of the loan fees are based primarily on the full price of the home, up to a state program limit of $625,500. In typical mortgages, costs are based mostly on a proportion of the amount you can borrow. Accumulated loan charges aren’t tax-refundable till the loan is paid back totally generally at some point in the distant future. Since the loan grows bigger over time, it might be tough to leave the home debt-free to a successor. Each householder who receives a federally insured Home Equity Conversion Mortgage, the most well liked kind of reverse mortgage, must first receive support from one of the governing body or non-profit housing support agencies authorized by the U.S. Office of Housing and Urban Development. Many professionals think such analysis should be made more generally available to seniors looking at repossession.

Get a quote using our reverse mortgage calculator to see if this might be a solution for you.

Source: Reverse Mortgage 4 U

The Theory of Reversitivity: What Einstein Would Say About The HECM Reverse Mortgage

The Theory of Relativity is a rather pithy statement that among other things, states that two events that appear simultaneously to one observer will not appear to be simultaneous to another observer who is in a state of motion. The focus is in the observing. There are no absolutes.

Einstein’s E=MC2 formula described the above noted relationship. The key is in the observing. However, in reverse mortgage parlance, this formula takes on a different meaning. It means that Evil results when misconceptions and misreporting (by the media, regulators, politicians and senior organizations) are constant and incessant. Although many view media reporting as biased and often one sided, these same people look to the media for viewpoints on unfamiliar topics.

Marty Bell of NRMLA recently wrote a cogent and extremely well reasoned rebuttal to the current (September)issue of Consumer Reports. He debunks the articles’ many misstatements that are presented as indisputable and immutable fact.

Inaccurate reporting is only one of the many challenges this industry faces. There are other challenges as well. I believe that the balance of 2009 will prove to be pivotal for the reverse mortgage industry. It contains the confluence of forces that could result in the denouement of a brilliant concept. Whether the forces of good (the reverse mortgage industry) will triumph apocalyptic ally over the forces of evil (biased media reporting, political demagoguery, poor GSE policy decisions, Congressional indifference toward seniors, poor state legislative initiatives, inappropriate FHA policy decisions) will soon be determined. If an attitudinal change is not in the offing, then I fear that the program could morph into something vastly different.

The number of reverse mortgage originators as grown exponentially, yet there has not been a similar growth in the program. Considering the potential market, the penetration of same has only shown a slight increase. While many older Americans could never imagine the US economy suffering from depression-like symptoms again, the current recession, has been particularly injurious to their pocket-books and wallets. Likewise, the government’s pocketbook, while resembling a bottomless pit, is facing many major challenges as well.

A parallax view of these challenges posits , on the one hand, an overwhelming need for the program while the latter challenge suggests that political hegemony and political expediency will decide the viability of the HECM program.

Recently (9/4/09), a front page article in the Wall Street Journal title Loan Losses Spark Concern Over FHA, discusses the rising losses at FHA. In 2 years, FHA’s market share has increased from 2.7% to 23%. Rising defaults have eaten away at FHA’s cash cushion. In 2007 FHA has had a cash cushion of just over 6%. Last year the percentage was down to 3 percent. The question must be asked. How will the overall FHA picture affect the HECM reverse mortgage program? Then of course , FHA is projecting a loss of close to 800 million dollars for the next fiscal year. The House of Representatives already told FHA to drop dead. The Senate said we’ll help a little. Maintaining a subsidy neutral position means that senior homeowner HECM borrowers will see substantially less money.

Recently there have also been suggestions out of Washington that the GSE’s will need to be revamped. The Housing and Economic Recovery Act (HERA) mandates that Fannie reduce its portfolio. Accordingly, the HECM program has taken it on the chin. Rising margins have definitely hurt. Eliminating the use of the CMT could turn out to be a bad decision if the worldwide banking community loses confidence- particularly over the geo-political situations in eastern Europe.

The various states need to dispense with the histrionics that reverse mortgage bills are designed to save seniors from unscrupulous individuals and companies serving this market. Often the bills make little sense and serve to drive lenders out of the state. What we need are bills that make sense. There is one main thing that states can do. If they do this 99% of their fears will be assuages. Require separate licensing for reverse mortgage originators and companies.

Over the past 20 years HUD has done quite a remarkable job overseeing a nascent and burgeoning industry. An example of this ongoing effort is evidenced by HUD ’s attempt to standardize counseling and to create a counseling roster(24 CFR Part 206). I would urge HUD to require separate licensing for individual originators as well. States, likewise should create separate licenses for those that participate in this industry. Make it so that only those that care about seniors and about serving their needs are able to serve.

Albert Einstein was able to develop his breakthrough formula because his creativity had no sentimental attachment to the prevailing conventional wisdom. Likewise, the reverse mortgage industry needs to look at this program differently. The goal of maintaining appropriate funding levels for those in need is key. Creativity, with the great minds that make up the industry , is not in short supply. I am confident that Washington working hand in hand with this industry can find a better way. E=mc2 represented a whole new way of regarding reality.

Einstein became a United States citizen because he loved what this country stood for. The United States represented the tradition of “moral strength”. Accordingly he would urge that the incessant pressure our elders face must be assuaged with a reverse mortgage reality that continues to meet the needs of seniors across the country. A politically expedient solution is no solution at all. Ignoring this pressing need places senior homeowners in a very precarious position. He would never believe that such a great country could treat elder Americans this way.

SOurce: Dennis Haber

Reverse Mortgage Guidelines Issued

The U.S. Office of the Comptroller of the Currency has issued guidelines warning financial advisors and consumers what to consider before entering into reverse mortgage contracts.

Reverse mortgages, available to anyone who owns a home or substantial equity in a home and is 62 years of age or older, are complex contracts secured by the borrower’s home, according to the guidelines. They are expected to be marketed more heavily as the population ages.

A standard mortgage or home equity line of credit may be more advantageous to the client who wants more retirement income or needs to pay health bills or other large expenses, says the comptroller guidelines. That’s because reverse mortgages have high upfront costs, making the first years of the loan expensive.

“For this reason, it is very important to have a realistic understanding of, not just your life expectancy, but also how long you can afford to pay the expenses related to your home, including utilities, property taxes, insurance, maintenance and repairs, and condominium fees, and how long you are physically able to keep living there,” the guidelines warn.

The average reverse mortgage borrower stays in a home for only six years, but it is most advantageous to remain in a home at least 10 years, according to the guidelines.

Advisors should warn clients that they may be the target of “aggressive sales pitches for expensive and inappropriate products or services” because of the large sum of money they receive from a reverse mortgage.

Most, but not all, reverse mortgages are made under a Federal Housing Administration program and are known as Home Equity Conversion Mortgages. The FHA provides protections for the borrower and the lender. The terms of reverse mortgages vary depending upon costs, payout options and repayment plans. Clients or their heirs want to pay it off and keep the home, says the comptroller, creating a web of options that need to be explored.

Additional information can be found at the U.S.Department of Housing and Urban Development (www.hud.gov/offices/hsg/sfh/hecm/hecmlist.cfm); NeighborWorks America (www.nw.org/network/home.asp); the AARP (www.aarp.org/revmort); the National Association of Reverse Mortgage Lenders (www.reversemortgage.org); and the National Council on Aging (http://www.benefitscheckup.org/).

Source: Financial Advisor

When a rebate isn’t a rebate — it’s a ripoff

They call them “rebate” cards. But they’re hardly a rebate. Instead, they are a mechanism to take millions of dollars due to consumers and give them back to the companies.

“Rebate cards are a colossal ripoff because sellers who long ago figured out how to make rebates difficult to obtain have now found a clever way to make them difficult to spend too,” said consumer advocate Edgar Dworsky, who runs the web site ConsumerWorld.org. “These are just inherently deceptive the way they are advertised.”

They are considered so deceptive that Canada recently issued guidelines to stop companies from using the word rebate when issuing consumers a card instead of a check.

Use of rebate cards is growing rapidly. In 2008, more than $4 billion worth were issued — up more than 50 percent over 2007, according to CreditCards.com.

Not only are these cards not actual rebates — although a handful of companies allow consumers to draw cash from them at ATMs — they come with hurdles that will keep all but the most industrious users from spending the full amount.

“The consumer has to go to the web site of the issuer and put in the password and find out how much money is left. If you go to the retailer without knowing the exact amount on the card they can’t take the card,” said Barbara Anthony, undersecretary of the Massachusetts Office of Consumer Affairs and Business Regulation.. “We are leaving money on the table that belongs to us because some retailers make it very difficult to find out what’s left on the cards. Millions of people across the country have these cards.”

Little government action has been taken so far about the cards in the U.S. partly because of how silently the money is drained away from the consumer and back to the company.

Mitch Katz, a spokesman for the FTC said, said his agency is aware of the issue and welcomes any consumer complaints about problems with the cards.

AT&T, which issues the cards in certain offers with its wireless phones, took a hit earlier this year when New York Attorney General Andrew M. Cuomo announced he had reached a $2.63 million agreement with the company over “a misleading and deceptive sales promotion involving rebate offers that were fulfilled with onerous and condition-laden rebate cards.”

Massachusetts’ Anthony is particularly concerned, because of the growth in the use of these cards at the expense of the time-honored rebate — the actual return of money by check or deduction at the register. At first glance, these cards might seem like a reasonable alternate way to get back the promised money, but once you get one it’s pretty clear it isn’t.

Anthony has been hearing increasing complaints from consumers about these cards. Unlike store gift cards, which show you a balance remaining on your receipt, the balances on these cards cannot be seen or determined at the store.

So, if you have $25 left and try to spend $25.01 the card will be rejected. No mechanism is offered to allow the $25 to go through and the consumer pay the penny difference. To add insult to the insult, the cards often carry fees that can be drawn from them without the consumer’s knowledge and can expire in as little as 120 days, as AT&T’s do.

“It’s hard to take a lot of money from people – but it’s very easy to take small amounts of money from millions of people,” Anthony said.

WalletPop used one of the cards and found just the situation Anthony described. It is nearly impossible to drain the card of its full value. Two other consumer officials told WalletPop that they, too, were stuck with these cards in their wallets. The trick to using them is going to a store, such as Target, that allows so-called split tender transactions. You need to know the value of what’s left on the card and apply that first, then pay whatever else is left by another method. Otherwise, the transaction will get rejected.

” When most people think about rebates they don’t really think about a debit card,” Anthony said. “They’re thinking cash. This is something that has been fixed in our minds for generations.”

That same sort of thinking led the Canadian government this month to let companies know that they don’t consider the cards to be rebates and should not be marketed as such.

“We felt that gift cards couldn’t be considered to be a rebate because they were not applicable to the end price of the product for which the rebate is being offered,” said Madeleine Dussault, an assistant deputy commissioner in Canada’s Competition Bureau — similar to the U.S. Federal Trade Commission.

The issue over the cards in Canada stemmed mostly from trying to protect consumers from being misled, she said. A rebate, Dussault said, should involve the reduction of the price of a product either at the register or later by check. Companies can issue the cards, she said, they just can’t call them a rebate. They are gift cards, she said, and should be called that.

Some companies, such as Cooper Tire, explain in their rebate ads that Canadians will be issued checks, and U.S. customers will get the cards.

WalletPop