Sometimes the complaint is that the home has not appreciated in value or has gone down in value. Maybe the borrower has lived so long and drawn so much money that there is no equity left. Maybe it is under water. Maybe the home is located in a depressed area.
Even if the property is under water, the heirs are protected. If they really want to keep the old homestead, they can buy it for 95% of appraised value. But realistically, most heirs already own a home and do not want to move into the old homestead.
Who has lost out here? The borrower did not lose out. The borrower got free housing maybe for decades. She had equity to draw on so she could hire in-home assistance and remain in her home. The heirs should be happy that Mom was housed securely in her own home at no cost. Who loses money? It is the FHA fund that loses money. But FHA makes it up with mortgage fees that are higher than a standard FHA loan.
Back to the home that does not appreciate. In most cases the value of the property will increase faster than the unpaid interest will accrue. In many urban areas real estate is escalating in value at a rapid rate. If the parents of those heirs had not been able to obtain a reverse mortgage, they might have had to sell it at the low prices current at that time. But because the parents were able to retain the home, there will probably be much more equity in the home than there would have been remaining cash from the parents’ sale of the home.
So those who attack the HECM reverse mortgage just do not know what they are talking about.