Reverse Mortgages on the Rise for Current Homeowners

What are the risks involved in enrolling in reverse mortgage programs?
1:54 | 12/05/12

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Transcript for Reverse Mortgages on the Rise for Current Homeowners
Now, we turn to our consumer watchdog. The government sounding the alarment tonight about something that affects millions of older americans. You may have seen commercials calling for a reverse mortgage. But tonight, abc news has learned there's growing concern and the government may be ready to take as. Here's abc's senior national correspondent jim avila. It was -- this was our dream. Reporter: The family home, dream and nest egg for wisconsin's linda and jim McMAHON. Until it had to be sold out from under linda to pay back a reverse mortgage as soon as her husband died. I get a letter, sorry to hear about your husband passing away. Buy the house or move out. Reporter: Reverse mortgages give homeowners an immediate cash payment in exchange for future equity. Allowing them to stay in the house until death. But only people 62 and older quali qualify. Linda was too young to be on the mortgage, so, when her older husband died, she lost everything. It's only one danger inherent in the reverse mortgage. Hi, I'm fred thompson. Hi, I'm henry winniklewinkler. Reporter: Critics say the commercials prey on vulnerable seniors. And today, the government is warning that reverse mortgages are not free money. Turn their equity into tax free cash. Give you tax free cash. They are not being told about the down side. Reporter: Right now in america, 57,000 seniors in reverse mortgages are in danger of losing their home. A nearly 10% foreclosure rate, four times higher than traditional mortgages. Tomorrow, the department of housing and urban development will recommend congress prohibit large lump sum payments. And recommend seniors be very careful with reverse mortgages. Is a reverse mortgage the last option? I really think it should be. Absolutely. Reporter: An option -- wonderful house. Reporter: -- Linda mcmahon regrets taking. I hope somebody will enjoy it. Reporter: Jim avila, abc news, washington.

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