By Jeff Lazerson | jlazerson@mortgagegrader.com | MortgageGrader.com | May 4, 2026
Article originally posted in Orange County Register on April 30, 2026
A growing number of seniors seeking reverse mortgages are facing significant and worsening financial strain, according to GreenPath Financial Wellness, a nonprofit financial counseling agency.
Greenpath reviewed its reverse mortgage counseling clients and found that their budget shortfalls rose sharply from 2024 to 2025.
The national nonprofit counted at least 34,000 clients last year, some of whom sought help with their reverse mortgages. Its survey found that 21% of those clients carried monthly expenses that exceeded their monthly income compared with 12% of such clients in 2024. That’s a 73% leap.
The average deficit also increased nearly by $300 to $1,793 from $1,498 per month, comparing 2024 and 2025 data.
“These are not small gaps,” said Jennifer Fraser, director of stakeholder engagement and grants at GreenPath. “Budget shortfalls of this size often mean struggling to afford essential living costs like housing, healthcare, utilities and food. Since funds from a reverse mortgage can be used for almost anything, it becomes a lifeline in times of financial hardship.”
In 2025, 50% of reverse mortgage clients lived on less than 50% of area median income, or AMI. For example, the Los Angeles AMI is $106,600. Half of that would be $53,300. And 23% lived on less than 30% of AMI or less than $31,980.
Like GreenPath, I’ve seen an increase in elderly borrowers with larger financial shortfalls who are struggling to make their mortgage payments. For many of them, it was either get a reverse mortgage or sell the home and rent.
Many are living on a small fixed income such as Social Security and/or a pension.
Some reverse mortgage basics
An FHA reverse mortgage or HECM (home equity conversion mortgage) is a loan for homeowners who are 62 and older that allows them to convert equity into tax-free cash without making monthly mortgage payments.
It’s a cash-out refinance without a mortgage payment.
There is also a non-FHA reverse mortgage available for homeowners as young as 55.
And there is a non-FHA reverse second loan available for 55 and older homeowners who don’t want to lose their low interest rate first mortgage.
In either of the first mortgage cases, borrowers retain homeownership, but the loan balance increases over time, also known as negative amortization. Repayment is required when the last surviving borrower dies, sells the home or moves out for more than a year.
The heirs have up to one year after the homeowner’s death to pay off the reverse mortgage (usually by selling the property). If the negatively amortizing mortgage exceeds the property value, it’s OK for the seller as the lender is not going claw back its money. The estate will owe the mortgage lender 95% of the sales price, with the remaining balance forgiven.
For example, say your home sold for $700,000 but you owed $750,000 due to the accumulation of negative amortization. Your heirs would owe the lender 95% of the $700,000 or $665,000. The other 5% would be used for settlement costs and agent commissions. The $55,000 of additional mortgage balance would be forgiven.
A reverse mortgage doesn’t eliminate other housing costs such as property taxes, insurance, association fees and maintenance. But by not having a house payment, the owner typically has more money available to pay for such important matters.
If you are a financially struggling senior homeowner, there are a lot of considerations to solving your budget shortfall, not just tapping equity through a reverse mortgage. I always say a reverse mortgage should be the loan of last resort.
Some suggestions
First and foremost, do you have other available funds that can be used — such as retirement funds that can be liquidated?
What about relatives? Can your siblings or your children help you out financially?
If none of those options is in the cards, consider tapping the home’s equity. You can go on the route of a regular mortgage or home equity line of credit. They always carry a lower interest rate than a reverse mortgage. The challenge with those is that you are going to have to make payments, whereas the reverse mortgage has no payments.
Homeowners ages 62 and older are sitting on $14.62 trillion of housing wealth, according to the National Reverse Mortgage Lenders Association. Hopefully, those in need have plenty of equity due to the run-up of property values over the past several years.
Freddie Mac rate news: The 30-year fixed rate averaged 6.3%, 7 basis points higher than the previous week. The 15-year fixed rate averaged 5.64%, 6 basis points higher than the previous week.
The Mortgage Bankers Association reported a 1.6% mortgage application decrease compared with one week ago.
Bottom line: Assuming a borrower gets an average 30-year fixed rate on a conforming $832,750 loan, last year’s payment was $253 more than last week’s payment of $5,154.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: a 30-year FHA at 5.625 %, a 15-year conventional at 5.375%, a 30-year conventional at 5.99%, a 15-year high-balance conventional at 5.875% ($832,751 to $1,249,125 in Los Angeles and Orange County and $832,751 to $1,104,000 in San Diego), a 30-year high-balance conventional at 6.375% and a jumbo 30-year fixed at 6.125%.
Eye-catcher loan program of the week: a 30-year mortgage, interest-only payments, fixed for the first five years at 5.875%, with a 1-point cost.
Jeff Lazerson, president of Mortgage Grader, can be reached at 949-322-8640 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.
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