In addition to the lender's origination fee, the upfront fees include a reverse-mortgage insurance premium, and standard closing costs — plus there's a monthly servicing fee and interest.
"If I were a consumer, I would focus more on the interest rate," says Meg Burns, director of the Federal Housing Administration Single Family Program Development. "That's an expense that is paid out over the long term of the loan, and it's a place where the product could be costly."
Most HECM fees do not have to be paid upfront, but if not, they are paid when the house is sold — either at voluntary sale or upon death of the homeowner.
Starting this year, elderly homeowners can use an HECM loan to sell their current residence and buy a new one in a single transaction. That helps families who want to downsize, move to a retiree community or move closer to family members.
"It's available, and we have closed a couple of purchase loans," says Jeff Lewis, chairman of Generation Mortgage, a reverse-mortgage lender. It's been difficult to do, because in many parts of the nation, home values have plummeted.
"But I think it is going to start to be very active as home prices stabilize," he says.
Another concern in the past centered around lenders who sometimes sold other financial products in conjunction with reverse mortgages.
McCaskill's legislation does not allow a lender to "cross-sell" anymore.
The goal is to prevent a homeowner from being pressured into taking out a reverse mortgage and using the money to buy a deferred annuity, which gives a high commission to the salesperson.
But the financial industry complains that the change will prevent them from providing seniors with the best advice.
Some financial planners who specialize in advice for senior citizens offer an array of services and products to help them hold onto their nest eggs.
But the legislation apparently prevents them from including a reverse mortgage, even though that can help retirees afford products such as long-term care insurance, Lewis says.
Nothing prevents retirees from learning more about reverse mortgages and making sure that it is their best financial option.
AARP offers a free consumer guide, "Reverse Mortgage Loans, Borrowing Against Your Home," that can be downloaded at www.aarp.org/revmort.
To make sure that you are considering all of your retirement options, you can visit the website decumulation.org, which is offered by the National Endowment for Financial Education, a non-profit foundation.
That can help you make sure that a reverse mortgage is a wise decision.
"It is just one part of a retirement strategy," says Brent Neiser, director of Strategic Programs and Alliances for NEFE. "It has its own set of cost and issues. And it should be one of the last options for supplementing your retirement paycheck."