Are reverse mortgages marketed too aggressively?

A piece in the Sunday New York Times looks at the soaring popularity of reverse mortgages:

As the United States has become an older nation, reverse mortgages have grown into a $20-billion-a-year industry, with elderly homeowners taking out more than 132,000 such loans in 2007, an increase of more than 270 percent from two years earlier. In surveys, many borrowers say reverse mortgages have improved their lives and provided money they needed for retirement.

But hundreds of people who have sought reverse mortgages - in lawsuits, surveys and conversations with elder-care advocates - have complained about high-pressure or unethical sales tactics they say steered them toward loans with very high fees.

There's a reason salespeople love these products -- and therein lies the problem. One elderly lady quoted in the New York Times piece paid an up-front fee of 8% -- $17,100 -- out of the initial proceeds of the loan. And the independent counsel that people are federally-required to receive before closing on a reverse mortgage appears to be a total joke --oftentimes it's paid for by the lender making it, by definition, not independent.

Here's something to keep in mind when evaluating financial products: there tends to be an inverse correlation between the commission the salesman receives and the value created for the investor. So it's important to be skeptical when it comes to products you see lots of advertising for, with "financial advisers" who seem a little too enthusiastic.

Total market index funds are probably the best investment option for the vast majority of investors. When was the last time you saw a television spot for one of those?
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