As regulations reshape the reverse mortgage, lenders hope to end up with a safer, more reputable product. Meantime, the changes are turning the economics of this business on its head.

Under new rules, seniors can no longer receive the entire proceeds from a Federal Housing Administration-insured reverse mortgage in one lump sum. Instead, they are generally limited to just 60% of the funds during the first 12 months. The rationing of proceeds is to make sure borrowers have some equity left when they leave the closing table, reducing the likelihood of default.

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