The bottom line is there are very few risks with these kinds of loans, provided that you and your mother do your homework, find a trustworthy lender, and make sure right candidate for a reverse mortgage.
The most important thing to understand is that the bank can't take your mother's house. She'll never give up title to her home until she sells the house or passes away. Even if she eventually owes more than the house is worth, she can stay in it for as long as she wishes.
In effect, your mother will buy that peace of mind by paying mandatory Federal Housing Authority insurance fees in the closing costs of the loan. Those insurance fees are used to pay back the lender in the event that your mother outlives the life of the loan or needs to sell the house for less than her reverse mortgage is worth.
Because of those insurance and other assorted fees, reverse mortgages have high closing costs compared to other types of home equity loans (which offer another good way to generate cash against the equity in your house.) Closing costs are usually rolled into the principal of the loan and amortized over time, which means if she doesn't sell her house or move, they won't have much impact. However, if your mother has any plans of selling her house or moving to a nursing home in the next few years, she's probably not a good candidate for a reverse mortgage because she'll have to pay off the principal of the loan as well as the bulk of those fees with the proceeds from the sale of the house.
You should also talk to your mother about her estate planning before she takes out a reverse mortgage. If it's important to her to leave her house to you or your siblings or children, then a reverse mortgage might not be right for her. Although her heirs will have the opportunity to pay off the loan if she dies, she'll have a much lower ownership stake in her house after receiving the payout from the loan.
Also, depending on the state she lives in, money from a reverse mortgage may affect your mother's Medicaid eligibility.
Still, if your mother's home equity is her largest asset, and if she's facing a daunting stack of monthly bills, she might be a good candidate for a reverse mortgage. Many older people who take out reverse mortgages opt to receive the money as a line of credit rather than as one lump sum, giving them a financial safety net in case of unexpected home repair bills or medical expenses.
In that type of emergency financial situation, drawing down from a reverse mortgage line of credit is certainly better than filing for bankruptcy.