The Return of Reverse Mortgages: Bilking or Saving Seniors?

Robert and Betty Ann Baker of Hillsborough, NJ are one of a growing number of seniors over age 62 who are tapping the equity in their home to help them pay bills, eliminate primary mortgage payments, or meet other needs. In September, the couple took out a $100,000 reverse mortgage on their home valued at $350,000.

What's a reverse mortgage, you ask? It's a mortgage where the bank pays you in exchange for the equity in your home.

Sounds great -- in principle. But opponents see reverse mortgages as a tool that allow lenders and brokers to scam grannies out of their home equity. Mr. Baker sees it more positively, as a safety net, allowing him and his wife to enjoy spending their other savings on home renovations, travel and paying bills without depriving themselves or their heirs.

"Assuming that we get out of this awful economy and home values once again begin to increase, our heirs will be able to pay the outstanding balance and still have money left over for themselves," says Mr. Baker.

What's clear is that reverse mortgages are on the rise -- especially since HUD is finalizing rules for regulating reverse mortgages for co-op owners.