'Wake up to a whole new life!'

The ads are enticing. "Did you know your home is a giant piggy bank?" asks a TV commercial for Judith O. Smith Mortgage Group in Fort Worth, Texas. The ad promises that you can pay off debts with tax-free income and that "your family will still inherit your home!" All Reverse Mortgage in Tacoma, Wash., invites seniors to "Wake up to a whole new life!" by using reverse-mortgage money to "Travel or Do Something Special." Ads from Wells Fargo, one of the biggest lenders, encourages seniors to get a reverse mortgage and "Do anything you want with the money."

The marketing blitz is drawing criticism. "Urging consumers to use the equity in their home like an ATM or credit card is a recipe for disaster, which is a lesson you would have thought we already learned all too well," says Chuck Cross, vice president of mortgage regulatory policy for the Conference of State Bank Supervisors.

The loans should be considered as a last resort, not a first resort, as some of the marketing now implies, says David Cotney, chief operating officer of the Massachusetts Division of Banks.

Industry leaders defend the new approach. "The old concept is that reverse mortgages are for financially hard-pressed seniors, often a widow who can't make ends meet on just one income," says Peter Bell, president of the National Reverse Mortgage Lenders Association. He says that although there are still some "need based" reverse-mortgage borrowers, a growing number simply want to eliminate current mortgage payments and boost cash reserves for home and car repairs or to "buy discretionary items like a new TV."

He says an even bigger new market is retirees with substantial assets who can use reverse mortgages to meet cash needs while giving their investment portfolios time to bounce back, which is the theme of recent ads sponsored by MetLife Bank.

Meg Burns, a director at the Federal Housing Administration who helps oversee the reverse-mortgage program, says the mortgages have a vital role to play. "Our primary mission in life is to try to put consumers into safe, affordable financing," she says, "and it is a really good loan product for people who have equity but not income, who have this asset but not sufficient cash flow to live comfortably."