Most Borrowers Still Wary of Reverse Mortgages

As my colleague Edward Wyatt wrote Thursday, the Consumer Financial Protection Bureau is looking into whether more regulation is needed of reverse mortgages — special loans that allow homeowners 62 or older to borrow against the equity in their houses, without making monthly payments.

The bureau, in a report released Thursday, said that the number of reverse mortgages had fallen since a peak before the financial crisis, but that the agency was seeing renewed interest. The number of consumers taking out a reverse mortgage as soon as they are able — age 62, under federal law — has jumped. In 2011, 9 percent of reverse mortgage borrowers were age 62, up from 2 percent during the 1990s. Nearly half of recent borrowers are under 70.

Yet, many consumers remain wary of the loans, according to the report. Although the potential pool of borrowers for reverse mortgages is large — and older Americans with substantial home equity may benefit from them — only about 2 to 3 percent of eligible households actually have a reverse mortgage.

Why the general lack of enthusiasm? The reasons, the report said, could include a belief that reverse mortgages should be used only as a last resort, a desire to own their homes free and clear after many years of making mortgage payments and a desire to leave the home to children or heirs.

Would you consider a reverse mortgage? Why or why not?