Close this search box.

Though Often Helpful, Reverse Mortgages Sometimes Abused

Print Article


“Reverse mortgages” can be a wonderful tool for keeping a frail elder at home, or for making a home stay more comfortable. Like so many good things, they can also be abused.

Typically, a reverse mortgage is a mechanism to permit a cash-short senior to liquidate a portion of his or her home equity to provide for care or other needs. To some elders, they are more attractive than traditional home-equity loans. The more traditional loans may be difficult to obtain without any income other than Social Security and a pension.

Reverse mortgages work very much as the name implies. Rather than taking out a loan and beginning to make monthly payments of principal and interest, the reverse mortgage borrower receives a monthly check from the lender. That check, and the income accrued on earlier checks, is added to the balance, but usually no payments are due during the life of the borrower.

Obviously, such an arrangement permits the gradual, planned withdrawal of home equity to pay for current costs of living. Most often, the reverse mortgage is used as a way of providing the small additional income required to keep an elder at home, and to delay any need for placement in a nursing facility or adult care home.

Although the reverse mortgage permits years of built-up home equity to be used to finance current care needs, the drawback of the arrangement should be obvious. At some point, determined by the amount of the monthly withdrawal, the value of the home and the interest rate, there will be no more equity available. In some reverse mortgage arrangements, the home must then be sold and the lender paid back; in others no sale is required until the death of the owner, but the home will no longer be available for distribution to the homeowner’s children.

It has been two decades since reverse mortgages first saw widespread use in this country. During that time a number of government agencies and community support groups have pioneered the concept, and have provided financial counseling to many applicants for reverse mortgages. More recently, a number of private lenders have seen a growing opportunity for a new type of business.

Last month a Kentucky company settled claims that its reverse mortgage program amounted to financial exploitation of the elderly. Commonwealth Life Insurance Company, a subsidiary of Providian Corporation of Louisville, Kentucky, agreed to a $5 million settlement in the lawsuit, which had been filed in San Mateo County, California.

Although Commonwealth had sold more than 1500 reverse mortgages to California residents beginning in the late 1980s, it had left the business about the same time that the suit was filed three years ago. Under the settlement, each Californian who took out a reverse mortgage with Commonwealth might be entitled to a $2,500 refund.

The Commonwealth case began as a San Mateo Public Guardian investigation. The public agency found that Beatrice Mathews, then in her 70s, had been talked in to obtaining a reverse mortgage and had quickly incurred over $35,000 in advances, fees and commissions. The Public Guardian was appointed to manage her estate, and brought the lawsuit.

San Mateo County promises it will pursue other reverse mortgage companies. A lawsuit has already been filed against Transamerica Corporation, alleging that its reverse mortgages amount to elder abuse.

In the Tucson area, reverse mortgages have been offered (in conjunction with extensive financial counseling sessions) by local social service agencies for several years. The reverse mortgage program now operates independently through Administration of Resources and Choices at (520) 327-8250.

Stay up to date

Subscribe to our Newsletter to get our takes on some of the situations families, seniors, and individuals with disabilities find themselves in. These posts help guide you in the decision making process and point out helpful tips and nuances to take advantage of. Enter your email below to have our entries sent directly to your inbox!

Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.