The Ups and Downs of Reverse Mortgages
The FHA insures reverse mortgages, which provides lenders with a strong incentive to issue them, because they can claim compensation in the event of a default. But this government support means that taxpayers could foot the bill for any number of defaulted mortgages. With a much higher default rate than traditional mortgages, reverse mortgages and their inherent risks should be left up to the market, not the Federal Housing Administration. If lenders cannot and will not bear the risk, the reverse mortgage market should not exist in the first place.