Kotlikoff: A reverse mortgage sounds great, but there are risks

by | Jun 19, 2017 | Larry Kotlikoff

By Laurence Kotlikoff

Originally posted at The Seattle Times, June 2017

Are you 62 or over, house poor and barely making ends meet? If so, the Department of Housing and Urban Development (HUD) claims to have the answer. It’s called a Home Equity Conversion Mortgage, or HECM. HUD regulates HECMs, or at least it says it does.

An HECM sounds like a great financial product. It lets people 62 and older, many with little if any financial assets, tap into their home equity to get either immediate or monthly cash payments to help pay bills. In exchange, the household (let’s call them the Smiths) signs an IOU (the HECM) with the financial company (let’s call it ABC Corp.) issuing the HECM. MORE