Policy Report Finds Reverse Mortgage Rollercoaster

A report on reverse mortgages released Wednesday finds reverse mortgages “aren’t for everyone.”

Delving into the Federal Housing Administration’s participation in the reverse mortgage market, the report, published by the National Center for Policy Analysis concludes reverse mortgages can be a useful tool, but should have limited government participation.

“Reverse mortgages advertised on TV sound like a super deal for seniors, but they are complicated and expensive,” said author and NCPA Senior Fellow Pamela Villarreal. “The anticipation of monthly income from a reverse mortgage is often overshadowed by misunderstandings over how these agreements work.” 

The report outlines recent changes made by FHA including a suspension of the fixed rate Standard reverse mortgage toward the Saver product and adjustable rate option. It also charts endorsements over time and cites surveys conducted on reverse mortgage advertising.  

The NCPA, which is an advocacy group that works to promote private, free-market alternatives to government regulation and control, points strongly to the default rate associated with reverse mortgages as a reason for its position of less government participation. 

“With a much higher default rate than traditional mortgages, reverse mortgages and their inherent risks should be left up to the market, not the Federal Housing Administration,” the report states. “If lenders cannot and will not bear the risk, the reverse mortgage market should not exist in the first place.”

View the report.

Written by Elizabeth Ecker

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