Financial crisis hits reverse mortgages hard

An industry at the crossroads

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A reverse mortgage is a secured loan to an elderly homeowner on which the borrower’s debt rises over time, but which need not be repaid until the borrower dies, sells the house or moves out permanently.

The "forward" mortgages that are used to purchase homes build equity, which is calculated as the value of the home less the mortgage balance. Borrowers pay down the balance over time. Reverse mortgages, in contrast, reduce equity because loan balances rise over time.