Timothy Taylor discusses the good, bad and ugly aspects of reverse mortgages. His conclusion?
My first instinct is to have rules about providing information accurately, and then to let people make their own financial choices. But I’ve also seen my own grandparents, as well as aging relatives of my friends, reach an age where they would have been quite vulnerable to someone telling them “the smart thing to do” and offering the siren call of a large check that wouldn’t ever have to be repaid. The reverse mortgage market is likely to grow rapidly as the boomers age. It’s going to offer a useful product for many, and some ugly scandals and frauds for others.
Timothy Taylor, “Reverse Mortgages“, Conversable Economist, 24 July 2012.
Reverse mortgages are home loans intended for older homeowners who require assistance to continue to live in their own home. The proceeds can be taken as a lump sum, or in monthly withdrawals. Payment of the loan is deferred until a borrower dies, sells, or moves out of the home.
Timothy links to a thorough Report to Congress on Reverse Mortgages (Consumer Financial Protection Bureau, 28 June 2012). The Dodd-Frank Act authorizes the Consumer Financial Protection Bureau (CFPB) to regulate reverse mortgages, and this study was completed in preparation for the task.