Friday, November 7, 2014
Tesuque (Convention Center)
*Names in bold indicate Presenter
The research program examines the demand for and performance of reverse mortgages by providing evidence on the preferences and behavior of actual and potential reverse mortgage borrowers. This study will extend existing analyses of the HECM program by providing matching HECM records with new data on older Americans' housing and financial condition, including anonymous credit records and deeds information. We shed light on the reasons for the slow growth of the reverse mortgage market from a variety of perspectives. The paper examines the impact of moral hazard on home maintenance for reverse mortgage borrowers, focusing on the documenting differences in appreciation rates for homes owned by older Americans with a reverse mortgage versus those of homes owned by older Americans who do not take out a reverse mortgage or non-elderly homeowners. As well, we examine use of funds, why reverse mortgages typically terminate well before the life expectancy of the borrower(s), and why reverse mortgages of all vintages extended their duration so much during the financial crisis. The paper links the evidence on performance and usage of reverse mortgages to pricing and demand for the product.