Complex Decision-Making and Cognitive Aging Call for Enhanced Protection of Seniors Contemplating Reverse Mortgages

Abstract

This article explains what reverse mortgages are and how they work. It also analyzes who could potentially benefit from them, but why this type of loan is so problematic for many seniors. The article then considers steps that can be taken to improve the effectiveness of current federal rules and counseling protocols to enable seniors to make well-informed decisions keeping in mind cognitive barriers and the complicated nature of this loan product.

Because many seniors may not be noticing the high costs associated with federally insured reverse mortgages, many believe these loans are now the product of choice for “predatory lending.”

Keywords: Consumer protection, reverse mortgages, cognitive psychology

JEL Classification: K00