The Department of Housing and Urban Development is expected Thursday to recommend that Congress limit large lump sum payments, and recommend seniors be very careful with reverse mortgages.
Hubert H. Humphrey III, the assistant director for the Consumer Financial Protection Bureau's Office of Older Americans, says that a reverse mortgage should be the last option.
"This is your nest egg. This is what you use when you don't have any other resources," he said. "People are not taking this out as a last available resource, they're all too often taking it out at age 62 right when they just qualify, and so they live another 15, 20, 25 years, and when they really need the money there's nothing there."
Humphrey said that couples who live together should always borrow together to protect both parties' interest in the property, so that the McMahans' experience will not happen.
By law, the Department of Housing and Urban Development requires counseling before someone receives a reverse mortgage, and recommends that extended family also take part to ensure the risks are clear, a stance NRMLA supports.
The National Reverse Mortgage Lenders Association also says that the industry itself has worked to improve counseling for potential borrowers.
"All in all there is a concentrated effort by all parties involved to improve counseling and we have seen a steady trajectory of its improving," Bell said.
According to the National Reverse Mortgage Lenders Association, reverse mortgages have helped more than 750,000 senior households and if the Department of Housing and Urban Development does recommend a limit on borrowing, the association will support it fully.
For Linda McMahan, the risks of her reverse mortgage -- an option she wishes she had never been presented -- now means living in a small apartment a block from her dream house.
"It's a wonderful house," she said. "I hope somebody will enjoy it."
AARP shared these links as resources: