In the early days of reverse mortgages, there were instances of abuse.  However, the federal government now regulates and insures reverse mortgages.  And in 2015, FHA put additional controls and protections in place for seniors.  But rumors and misconceptions continue to abound.   

There are many negative rumors about reverse mortgages, but almost none of them are true.  Before President Reagan put FHA in charge of the program in 1987, there were some abuses.  In several instances, the homeowner wound up owing more than the home was worth.  In others, the lender was entitled to half of the increase in the home value, on top of the interest that they added.  But none of those things have been possible for many years.

There have been instances where seniors have done a reverse mortgage for the wrong reasons, and it’s come back to haunt them.  Using their home equity to play the stock market, for example, is very risky.  Sometimes, when a retiree suddenly has access to tens of thousands of dollars, they splurge and spend it on expensive items.  Or they have good intentions, but become overly generous and wind up giving away money that they need to fund their retirement. 

Before 2015, most of the negative stories in the press had to do with the situation where one of the spouses (usually the wife) had to come off of the deed, because she was younger than 62.  A reverse mortgage was then done in only the husband’s name, but when he died, the loan became due.  If the younger spouse didn’t then qualify for her own reverse mortgage, she would have to sell the home to satisfy the loan. 

Also before 2015, some seniors were approved for a reverse mortgage, who probably never should have been.  If a retiree doesn’t have enough income to pay property taxes and homeowner’s insurance, and most of the reverse mortgage proceeds need to go toward paying off existing debts, there won’t be enough in the line of credit to keep the senior above water for long.  A reverse mortgage will only delay the inevitable. 

Sometimes, an unscrupulous loan officer will try to talk a senior into doing a reverse mortgage, even though it’s not in the homeowner’s best interest.  An unethical financial planner might do the same, in order to convince the retiree to allow him to invest the money.  In one case, a 90-year-old woman was talked into purchasing a delayed annuity, which wouldn’t start paying her for ten years.

These kinds of abuses occur with all types of traditional home equity loans.  But when it happens with a reverse mortgage, it seems to get much more negative attention, and gives the entire industry a black eye.  Fortunately, in 2015, FHA made major changes to the program, which now prevent most of these from happening.  They include the following:

  • FHA has reduced their mortgage insurance premium by 75%, for most seniors, which saves thousands of dollars in fees.
  • “Underage” spouses are no longer removed from the deed.  And the reverse mortgage doesn’t become due when the older spouse passes on.
  • All lenders must now financially qualify prospective borrowers, including a credit check and verification of income (to ensure that future taxes and insurance are likely to be paid).

The bottom line is that any senior, family member, or advisor should be wary of false rumors about reverse mortgages.  It’s not the right program for everyone, but educating themselves about the facts, and the recent FHA changes, should put them in the best position to make an informed decision.

About our HHN TV Aging in Place Reverse Mortgage Expert Contributor:

Rick Schluter (a.k.a. Reverseman) has had a diverse career.  His degrees are in physics and mathematics, and he served for six years as an officer in theUnited States Navy nuclear submarine program.  Afterward, he taught nuclear physics for seven years.  Twelve years were spent in the commercial nuclear power industry, and eight years in the computer software field.

For the past eleven years, Rick has been a reverse mortgage specialist, and regards this as his most satisfying occupation.  He’s been interviewed on television and radio, quoted in magazines and newspapers, spoken at conferences, and given numerous public presentations about the pros and cons of the reverse mortgage program.  Rick considers himself first and foremost an educator on this important topic.

In his spare time, Rick enjoys teaching chess to children, being a guest lecturer of astronomy and physics at local schools, and volunteering for numerous senior-related causes.  A competitive swimmer, he is the current New Jersey State Master’s champion in the 100-yard butterfly.  Rick lives in northern New Jersey with his wife and daughters.  He can be contacted directly at


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