In the past most elder law attorneys advised their clients to stay away from reverse mortgages. That is beginning to change.
Just a few short years ago reverse mortgages were often seen by elder law attorneys as an unfortunately popular way for senior citizens to be taken advantage of and lose their homes. The industry was full of abusive practices and sometimes outright fraud. Despite that, many senior citizens—unaware of the problems in the industry and in need of money—signed reverse mortgages. When the financial crisis hit, news about the problems in the reverse mortgage industry began to filter out to the general public, and they became far less popular. However, as the New York Times reports in “The Quiet Comeback of Reverse Mortgages,” the use of reverse mortgages is on the rise again and—thanks to some key reforms—may be appropriate in the right circumstances.
Stricter government regulations have weeded out most of the abuses in the reverse mortgage industry and have made it much less likely that anyone who signs one will lose his or her home. Additionally, because a reverse mortgage that follows the rules is federally insured, borrowers and their estates are not responsible if the home’s value decreases to a point where it is lower than the amount taken out under the reverse mortgage.
These changes make reverse mortgages an intriguing option for seniors who need money and who are not concerned about leaving their homes to their heirs.
However, reverse mortgages are still not appropriate for everyone. Because every situation is unique, it’s best to consult with qualified counsel before signing a reverse mortgage.
Reference: New York Times (July 22, 2016) “The Quiet Comeback of Reverse Mortgages”