In general, I have always thought that these were very risky investments by the banks. Apparently they don't always work well for the cash recipients either.
Reverse Mortgages Pose Big Risks for Seniors, Warn Attorneys and U.S. Officials
Jim Avila and Serena Marshall, AOL Real Estate, 6 December 2012 (hat tip: NC)
Seventy percent of the time, seniors exchange the equity in their homes for the reverse mortgage payout as a lump sum and the money is too often spent by the time it's needed for late-in-life hardships.
"This is your nest egg. This is what you use when you don't have any other resources," he said. "People are not taking this out as a last available resource, they're all too often taking it out at age 62, right when they just qualify, and so they live another 15, 20, 25 years, and when they really need the money there's nothing there."
It never really occurred to me that people would be foolish enough to take the money as a lump sum payment. I guess if you were dying of cancer and wanted a last vacation, and didn't have family you wanted to help down the road it would make sense. Granted, seniors are known to be vulnerable to financial pitches, but it really sounds more like it is a continuation of the behavior that has made the latest retiring generations also the generations that are most in debt.