For many years in Retirement Watch I’ve presented a balanced view of reverse mortgages. These are tools for seniors to draw down their home equity without having to move from their homes or make payments during their lifetimes. I’ve maintained they are good tools in some situations and detailed those situations. The new Consumer Financial Protection Bureau recently issued a report taking a different view. The report is very critical of reverse mortgages and, while the CFPB hasn’t moved to ban or restrict reverse mortgages, the report likely is a precursor to such actions.
That’s why I’m pleased to see Alicia Munnell, a supporter of CFPB and retirement policy expert, come out with a strong criticism of the CFPB report. While there are abuses and misuses of reverse mortgages and any other financial instrument, the solution rarely is to ban them. CFPB states that it doesn’t think consumers can be educated enough to understand and properly use the complicated reverse mortgages. That’s a sad view, and it risks leaving seniors with poor choices and taking a valuable tool from their toolbox.