Q: My mother is 65 and receiving about $700+ in social security benefits. She has no other income or retirement benefits. She is having a tough time paying her monthly bills on this money.

I was listening to Clark Howard and he mention reverse mortgages to a caller. I was not familiar with how reverse mortgages work but wondered if it might make sense for my mother.

I went to the web site he recommended — reversemortgage.org — and got a lot of information. I’m not sure if this is a good idea because of the $15,000 to $20,000 upfront fees that would be required just to establish the loan. I haven’t mentioned this to my mother because I don’t want her to jump on it just for the monthly income if it turns out not to be in her best interest.

A: I don’t know about the website you went to, but the guy who invented reverse mortgages, Ken Scholen, maintains that website in addition to his day job of overseeing housing issues for AARP. Ken has also written an excellent book about reverse mortgages that you and your mother should read, called Your New Retirement Nest Egg. It should be available at your local library or you can probably buy a copy online at amazon.com.

Anyone who tells you you’ll have to pay $20,000 in fees is trying to rob you. You should only use a reverse mortgage lender who is legitimate. Stick with a big brand name, like Wells Fargo, Countrywide, etc. There are 2 kinds of reverse mortgages: One backed by HUD and one backed by Fannie Mae, the secondary market leader. You can find out more about these two mortgage products at www.HUD.gov and HomePath.com (Fannie Mae’s website).

Your mother sounds like she might be helped by a reverse mortgage. Just take care so you and she do not get scammed.

July 10, 2004