Older Homeowners Cautioned on Use of Reverse Mortgages

Wall Street Journal (03/14/08) P. C4; Kardos, Donna
The Financial Industry Regulatory Authority (Finra) is advising senior homeowners to proceed cautiously before using reverse mortgages to access their home equity. The group cautioned that a reverse loan--which entails a bank making payments to a homeowner instead of the homeowner making payments to a bank--can be a risky financial move due to high fees and the problems that often ensue when willing the property to heirs. The Finra warning notes that, in some cases, those who sell the mortgages may profit from the sale, giving them double the incentive to talk someone into a loan they may not need. Nevertheless, with foreclosures rising amid the subprime-mortgage fallout, some homeowners who have built up equity over the years may consider reverse mortgages their only alternative to losing it.