You’re sitting across from a potential client, a 68-year-old homeowner who wants to downsize. The conversation is going well until you mention a HECM for Purchase as an option. She shakes her head immediately. “Oh no, I’d never do that. Reverse mortgages are a scam.”

Sound familiar?

This objection costs REALTORS real business opportunities every day.

• You lose potential HECM for Purchase transactions.
• You miss chances to help clients age in place.
• You can’t position yourself as the go-to agent for senior homeowners in your market.

The good news is this: your clients aren’t wrong to be cautious. They’re just working with outdated information. The “reverse mortgages are a scam” belief comes from real industry problems in the past. When you understand where this perception comes from and know the facts that counter it, you can address their concerns with confidence. That confidence translates directly into more transactions and stronger referral networks.

Let’s break down why seniors think reverse mortgages are a scam, what the actual facts are, and how you can use this knowledge to grow your business.

Why Seniors Think Reverse Mortgages Are a Scam

The Origins of the Negative Reputation

The reverse mortgage industry has a complicated history. In the 1990s and early 2000s, aggressive marketing tactics created real problems. Some lenders pushed products with high fees and confusing terms. Seniors signed documents they didn’t fully understand.

Television commercials didn’t help. Celebrity endorsements promised “free money” without explaining the details. These ads made reverse mortgages sound too good to be true, and many people rightfully became suspicious.

Then came the foreclosure stories. Real families lost homes after taking out reverse mortgages. What often got left out of these stories was the context. In most cases, homeowners didn’t pay their property taxes, which could lead to foreclosure with traditional “forward mortgages” as well. The foreclosures weren’t due to problems with the reverse mortgage itself, but because loan obligations weren’t met. Still, the damage to the industry’s reputation was done.

Add to this the general distrust many seniors have of financial products. They remember the predatory lending practices that led to the 2008 housing crisis. They’ve seen friends and family members hurt by bad financial decisions. When someone offers a product that sounds complicated, their guard goes up.

Modern Media Amplification

Negative stories always get more attention than positive outcomes. Outdated headlines about an 82-year-old widow losing her home because of a reverse mortgage generates clicks. A story about a couple using a HECM for Purchase to buy their dream retirement home doesn’t make the news.

Consumer protection articles sometimes paint all reverse mortgages with the same broad brush. They warn readers about potential dangers without explaining the protections now in place. These articles serve an important purpose, but they can leave readers thinking all reverse mortgages are bad.

Well-meaning adult children add another layer to the problem. They read an article online or hear a story from a friend. Then they warn their parents to stay away from reverse mortgages, not realizing the information they’re sharing is outdated or incomplete.

The Result

Many seniors dismiss reverse mortgages without understanding how they actually work today. This fear prevents them from exploring a legitimate financial tool that might solve real problems they’re facing. The “reverse mortgages are a scam” belief becomes a barrier between them and a solution that could help them age in place or buy their retirement home.

For you as a REALTOR, this means lost opportunities.

• You can’t help clients who could benefit from a HECM for Purchase.
• You can’t serve seniors who want to buy a home but don’t want a monthly mortgage payment.
• You miss out on transactions that other, more informed agents will close.

Countering the “Reverse Mortgages Are a Scam” Myth

Federal Regulation and Consumer Protections

Here’s what many seniors don’t know: the federal government oversees the HECM program. The Department of Housing and Urban Development (HUD) sets the rules, monitors lenders, and enforces consumer protections.

Before anyone can close on a HECM, they must complete independent counseling with a HUD-approved housing counselor. This isn’t optional. The counselor explains how the loan works, discusses alternatives, and makes sure the borrower understands what they’re signing up for. This counseling session is designed to catch potential problems before closing.

The non-recourse feature provides critical protection. If the loan balance ever exceeds the home’s value when it’s sold, neither the borrower nor their heirs owe the difference. The FHA insurance fund covers that shortfall. This protection means families never inherit debt beyond the home’s worth.

Lenders who want to offer HECMs must meet strict licensing and approval requirements. HUD doesn’t let just anyone originate these loans. This oversight creates accountability that didn’t exist in the early days of the industry.

What Makes Modern HECMs Safer

Major changes in 2015 made HECMs significantly safer. Lenders now conduct a financial assessment before approval. They evaluate whether borrowers can afford to pay property taxes, homeowners insurance, and home maintenance costs. This assessment prevents situations where seniors take out a reverse mortgage but can’t meet the ongoing obligations.

If the financial assessment shows a risk, lenders can require a Life Expectancy Set-Aside (LESA). This means part of the loan proceeds get reserved specifically for paying property taxes and insurance. The set-aside removes the risk of foreclosure due to unpaid property charges.

Disclosure requirements are much clearer now. Borrowers receive detailed information about costs, loan terms, and responsibilities. The documents explain what happens in different scenarios. There’s less room for confusion or misunderstanding.

The government also limits fees and costs. While HECMs do have closing costs (similar to traditional FHA loans), there are caps on what lenders can charge. Borrowers can finance these costs into the loan, so they don’t need cash out of pocket at closing.

Real-World Benefits for Real People

When used appropriately, reverse mortgages solve real problems for real seniors. They allow people to age in place without the stress of monthly mortgage payments. For someone on a fixed income, moving to a more senior-friendly community while eliminating a $1,500 mortgage payment can be life-altering.

HECM for Purchase transactions open new possibilities. A 70-year-old couple can buy a single-story home near their grandchildren with a 60% down payment and no monthly mortgage payment. They preserve their retirement savings while moving to a home that better fits their needs.

With larger down payments, the loan provides cash flow when seniors need it most. Healthcare expenses, home modifications for accessibility, or simply covering daily living costs become more manageable. Seniors can tap their home equity without selling and moving.

By using a reverse mortgage strategically, seniors preserve other retirement assets. Instead of withdrawing from a 401(k) or selling investments in a down market, they can use home equity. This flexibility gives them more control over their financial future.

Addressing Common Fears Directly

“Reverse mortgages are a scam. The bank will own my home.”

This is the most common fear, and it’s completely false. Borrowers retain title and ownership throughout the life of the loan. They can leave the home to their heirs. The lender has a lien, just like with a traditional mortgage, but ownership never transfers.

Part of this fear comes from real scams that target seniors, like deed theft schemes where criminals actually do steal home ownership through fraud. Those scams exist, but they have nothing to do with legitimate, federally-insured reverse mortgages.

Confusing reverse mortgages with actual scams is like confusing a bank withdrawal with a bank robbery. Both involve accessing money, but one is a legitimate financial transaction and the other is a crime.

“Reverse mortgages are a scam. My heirs will inherit debt.”

The non-recourse feature prevents this. When the home is sold, the loan is repaid from the proceeds. If the loan balance exceeds the home’s value, FHA insurance covers the difference. Heirs never owe more than the home is worth. They can choose to repay the loan and keep the home, or sell it and keep any remaining equity.

“Reverse mortgages are a scam. I’ll get kicked out.”

Borrowers can stay in their homes as long as they meet three basic obligations: pay property taxes, maintain homeowners insurance, and keep the home in good repair. These are the same obligations they’d have with any mortgage or as an outright owner. Only if they fail to meet these requirements does foreclosure become a possibility.

“Reverse mortgages are a scam. The fees are too high.”

HECM closing costs are comparable to traditional FHA loans. There’s an origination fee, mortgage insurance premium, and standard closing costs. Yes, these add up. But they’re financed into the loan, and for many seniors, the benefits far outweigh the costs. The key is making sure the loan makes sense for their specific situation and timeline.

How REALTORS Can Address This Objection Confidently

Step 1: Listen and Validate

When a client says reverse mortgages are a scam, don’t jump straight into correction mode. That approach rarely works and can make you sound like a salesperson.

Instead, listen. Ask them what they’ve heard about reverse mortgages. Let them share their concerns fully. You might learn they had a friend who had a bad experience, or they read an article that frightened them.

Show empathy. Say something like, “I understand why you’d be cautious. There’s a lot of confusing information out there, and the last thing you want is to make a decision that hurts you financially.” This validation shows you’re on their side.

Step 2: Separate Myth from Reality

Once you understand their specific concerns, address them directly with facts. Use simple language. Avoid industry jargon that might confuse them further. This is your chance to replace the “reverse mortgages are a scam” myth with accurate information.

If they’re worried about losing their home, explain that they keep ownership and can leave the home to their heirs. If they’re concerned about their children inheriting debt, explain the non-recourse protection clearly.

Focus on the protections now in place. Talk about the mandatory counseling requirement. Explain that HUD oversees the program. Share that financial assessments help prevent problems before they start.

The key is matching your response to their specific fear. Don’t give a generic speech about reverse mortgages. Address what they actually told you they’re worried about.

Step 3: Share Real Scenarios

Abstract explanations only go so far. Real examples help clients see how a HECM might work in their situation.

Share a story about a client who used a HECM for Purchase to downsize. Maybe they sold a large family home and bought a smaller condo. They put down 50% and financed the rest with a HECM. Now they live mortgage-free with money left over from their home sale.

Or talk about a senior who eliminated their mortgage payment and stayed in their home near family. They were considering selling because the monthly payment was straining their budget. A reverse mortgage let them stay put.

Make the scenario relatable to their situation. If they’re looking to downsize, use a downsizing example. If they want to age in place, share an age-in-place story. This helps them visualize how a HECM might work for them specifically.

Step 4: Emphasize Your Role

Be clear about your role in this conversation. You’re not selling a reverse mortgage. You’re a REALTOR sharing information about options that might help them achieve their housing goals.

Your job is to help them explore all possibilities. A reverse mortgage might be one of several solutions worth considering. Or it might not be right for them at all. Either way, you’re there to provide information, not pressure.

Always connect them with a HUD-approved housing counselor for unbiased education. This referral reinforces that you’re not trying to push a product. You’re helping them access expert guidance from an independent source whose only job is to make sure they understand the loan.

Step 5: Know When It’s NOT Right

Building trust means being honest about when a reverse mortgage doesn’t make sense. This honesty sets you apart from agents who just want to close a deal.

• If someone plans to stay in a home for only two or three years, a HECM may not be worth the high closing costs.
• If they don’t have sufficient equity (between 45% and 60%), they might not qualify or might not benefit enough to justify the expense.
• If they can’t or won’t maintain the property (roof, flooding, mold, infestation…) and pay property charges, a reverse mortgage could end in foreclosure.

Being willing to say “this probably isn’t right for you” builds credibility. Clients trust advisors who tell them the truth, even when that truth doesn’t lead to an immediate transaction.

What to Say When You Don’t Know

You don’t need to be a reverse mortgage expert. You need to know enough to have an informed conversation and know when to bring in specialists.

If a client asks a technical question you can’t answer, be honest. Say, “That’s a great question. Let me connect you with a HUD-certified counselor who can explain that better than I can.” This honesty builds credibility far more than making up an answer or guessing.

Your value isn’t in knowing every detail about reverse mortgages. It’s in knowing they exist, understanding when they might help, and connecting clients with the right resources to make informed decisions.

Why This Knowledge Grows Your Business

Expanded Service Offerings

1. Most REALTORS can’t effectively serve senior clients who don’t qualify for traditional financing or who don’t want a monthly mortgage payment. You can.
2. When you understand reverse mortgages, you can help seniors denied by traditional lenders. Someone with limited income but significant home equity becomes a viable client instead of a dead end.
3. You close HECM for Purchase transactions that other REALTORS in your market don’t even know exist. While your competitors are telling 68-year-old buyers they need to qualify for a conventional mortgage, you’re showing them how to buy with a smaller down payment and no monthly payment.
4. You become the go-to agent for homeowners 62 and older. This demographic controls significant wealth and makes up a growing percentage of both buyers and sellers.
5. Positioning yourself as their trusted resource creates a competitive advantage.

Referral Network Benefits

Knowledge about reverse mortgages positions you as an expert in senior housing options. Financial planners notice. Elder law attorneys remember. CPAs keep your card handy. These professionals regularly work with clients who need real estate guidance, and they refer to agents they trust to handle complex situations.

Past clients refer their friends because you helped them thoroughly. They don’t just remember that you sold their house. They remember that you took time to explain options they didn’t know existed, connected them with helpful resources, and genuinely cared about their wellbeing.

These referrals are higher quality. They come from people who already trust you, which means less time spent building rapport and more time helping clients achieve their goals.

Competitive Advantage

Here’s the reality: most agents avoid reverse mortgage conversations. They don’t understand them, so they ignore them. Or worse, they repeat the same myths their clients believe.

Your confidence sets you apart. When a 70-year-old seller asks about downsizing options, and you can knowledgeably discuss HECM for Purchase, you stand out. When you can address reverse mortgage concerns without dismissing them, clients see you as a trusted advisor, not just a salesperson.

This reputation builds over time. You become known as the agent who really understands senior housing needs. That reputation attracts clients actively looking for expertise, not just the lowest commission rate.

Next Steps

Your senior clients often think reverse mortgages are a scam because they’re working with outdated information. The industry had real problems in the past. Today, strong federal protections and clear regulations have addressed those issues. Understanding why clients believe reverse mortgages are a scam helps you address their concerns more effectively.

The facts are on your side. HUD oversight, mandatory counseling, non-recourse protection, and financial assessments make modern HECMs significantly safer than earlier versions. When used appropriately, they solve real problems for seniors who want to age in place or buy a retirement home without monthly mortgage payments.

Your opportunity is clear. Address concerns with confidence, expand your service offerings, and truly help senior clients explore all their options. This knowledge doesn’t just close transactions. It builds a reputation that generates referrals and positions you as the senior housing expert in your market.

Ready to serve senior buyers with confidence? Consider downloading our REALTORS Checklist for HECM for Purchase. This all-in-one resource guides you through every step, from eligibility to closing. Unlock more transactions, avoid costly mistakes, and turn one client into ongoing referrals. Get your checklist today and start closing deals other agents are missing.