Reverse mortgages have been a popular source of money for retirees since the loan was introduction in the late 1980’s. The ability to tap the equity in a person’s home without the need to repay the balance during the owner’s lifetime made the arrangement a perfect match for those looking to reinforce their nest egg. However predatory lenders and ill informed consumers eventually lead to large numbers of foreclosures which prompted action by the Department of Housing which regulates the industry. In the last few years new rules have been implemented which among other things, restrict how much can be borrowed in the first year of the loan, stricter requirements for investigations into the ability for the mortgagee to maintain the home, as well higher levels of protection for surviving spouses. While these new rules do not completely eliminate the potential for abuse, they represent a step in the right direction for protecting individuals from financial harm at a vulnerable age.
See Donna Rosato, Reforms Come to Reverse Mortgages, Consumer Reports, March 31, 2016.
