Reverse mortgage dangers debunked

Part 6: State of the 'reverse' market
Published on Feb 1, 2010

Editor's note: This is Part 6 of a six-part series. Read Part 1, Part 2, Part 3, Part 4 and Part 5. As pointed out last week, the growth of reverse mortgages has no resemblance to the growth of subprime mortgages, and there is no financial fiasco looming. This week I want to deal with three other arguments against reverse mortgages that keep popping up in the media. Home Equity Conversion Mortgages (HECMs) Are Too Expensive: This argument is ubiquitous, yet it makes no sense. Too expensive relative to what? Right now, there are no private programs to compare HECMs with, but when such programs existed their costs were much the same. The instrument that most resembles the HECM is the forward home mortgage -- while they meet different needs, the delivery systems are very similar, the cost items are much the same, and therefore the total costs ought to be similar. And so they are, absent the mortgage insurance premium on HECMs. About half the upfront cost of an HECM is the mort...