Some borrowers are not even aware that the transactions they sign up for are debt instruments requiring repayment. Lenders' marketing materials may make that problem worse by glossing over the payback requirements. "In fact," said the regulators in their guidance, some lenders' marketing material "has prominently stated that the consumer is not incurring a mortgage, even though the fine print states otherwise."

Other lender problems noted by the regulators include:

-- Inappropriate cross-selling of additional financial products, sometimes presented as a requirement for the borrower to obtain a reverse mortgage. These include costly annuities, investment programs and home-repair service contracts. Often these products eat up a significant portion of the money being drawn down via the reverse mortgage, and leave the borrowers without adequate funds "to meet emergency needs or to pay ordinary living expenses." The regulators' recommendation to lenders tempted to cross-sell high-profit products to poorly counseled seniors seeking reverse mortgages: Don't do it. Not only is it unfair to the applicants, but their subsequent financial weakness could come back and haunt you later.

-- Failure by banks to explain the potential downsides of reverse mortgage payment alternatives to applicants upfront. For example, some lump-sum payout options may be inappropriate for certain seniors because they adversely affect their ability to qualify for needs-based public benefits, such as Supplemental Security Income. Lenders should tell applicants about these dangers, rather than letting them blunder into the wrong program choice.

-- Failure to inform borrowers upfront about their own responsibilities under reverse mortgage contracts. For example, there may be no escrow account attached to a reverse mortgage -- something borrowers might assume is standard, based on their experience with regular home mortgages. Yet without an escrow that pools money to pay for local property taxes and hazard insurance, reverse mortgage borrowers may not remember to pay those bills themselves -- risking foreclosure and loss of the home.

The regulators' message to banks: Explain all the working parts of the loan upfront, and make sure the borrowers fully understand what they've got to do on taxes and insurance, and by when.

The same advice should apply to seniors and the family members: Research and understand all the financing and estate planning alternatives available to you -- plus the inner mechanics of the various reverse mortgage options -- well in advance of making an application.