Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, November 24, 2009

Reverse Mortgages -- A disaster waiting to happen?

Reverse Mortgage The potential pitfalls of reverse mortgages are detailed in Reversals of Fortune, Consumer Reports, Sept. 2009, at 35.

Here is an excerpt from the article:

Reverse mortgages can be valuable as a last resort for seniors who want to stay in their homes and have significant equity but need money to supplement income or banish an existing mortgage payment. With a reverse mortgage, they can trade some of that equity for a lump sum and monthly payouts.

But those loans can be terrible for customers who don't understand the complicated rules governing them and how quickly high fees and interest charges can balloon. They can end up stranded in their homes without any remaining equity to cover unexpected costs later in life.

Use of the loans is exploding as lenders—who shoulder almost no risks—push them to the growing ranks of retired baby boomers, especially for spending on vacations, new cars, and more.

Lawmakers and regulators are getting worried.


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Isn't the risk shouldered by lenders the collapose of the housing market since there is no recourse?

Posted by: Evan | Nov 24, 2009 10:22:36 AM

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