What’s Right with Reverse Mortgages | Knowledge@Wharton Today


the Reverse Advisor

A recent New York Times article profiled senior citizens who had lost their homes as a result of reverse mortgages, which allow people 62 and older to borrow money against the value of their homes and doesn’t require the loans to be paid back until they move out or die. In this op-ed, Wharton emeritus finance professor Jack Guttentag, who runs a website called The Mortgage Professor, argues that the story misrepresents the program, which he calls “one of the best engineered financial tools of our generation.”

Home Equity Conversion Mortgages (HECM), or reverse mortgages, which are designed, administered and insured by the Federal Housing Administration (FHA), are one of the best engineered financial tools of our generation. It is designed to meet the widest possible spectrum of senior needs, from repairing the roof of their home, to paying for their grandchildren’s education, to touring the world, and…

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