Debate on Reverse-Mortgage Risks Heats Up

This is another issue in the underwriting field needs watching.

The consumer advocates say seniors should use reverse mortgages—which allow older Americans to tap into the equity in their home—only as a last resort because fees can be high and the loans could affect eligibility for government-assistance programs such as Medicaid. Also, if borrowers deplete home equity, they won't have much to pass on to heirs and could have a harder time funding long-term care, the groups warn.

Advocates also worry that if more isn't done to help vulnerable consumers understand the risks, the expanding reverse-mortgage market could melt down just like the subprime-mortgage market did ahead of the financial crisis.

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