Finance and Economics Discussion Series

<p>Reverse mortgages allow elderly homeowners to tap into their housing wealth without having to sell or move out of their homes. However very few eligible homeowners have used reverse mortgages to achieve consumption smoothing until recently when the reverse mortgage market in the United States witnessed substantial growth. This paper examines 1989-2007 loan-level reverse mortgage data and presents a number of findings. First I show that recent reverse mortgage borrowers are significantly different from earlier borrowers in many respects. Second I find that borrowers who take the line-of-credit payment plan single male borrowers and borrowers with higher house values exit their homes sooner than other reverse mortgage borrowers. Third I combine the reverse mortgage data with county-level house price data to show that elderly homeowners are more likely to purchase reverse mortgages when the local housing market is at its peak. This finding suggests that the 2000-05 housing market boom may be partially responsible for the rapid growth of reverse mortgage markets. Lastly I show that the Federal Housing Administration (FHA) mortgage limits which cap the amount of housing wealth that an eligible homeowner can borrow against have no effect on the demand for reverse mortgages. The findings have important implications to both policy-making and the economics of housing and aging.</p><p>This work has been selected by scholars as being culturally important and is part of the knowledge base of civilization as we know it. This work was reproduced from the original artifact and remains as true to the original work as possible. Therefore you will see the original copyright references library stamps (as most of these works have been housed in our most important libraries around the world) and other notations in the work.</p><p>This work is in the public domain in the United States of America and possibly other nations. Within the United States you may freely copy and distribute this work as no entity (individual or corporate) has a copyright on the body of the work.</p><p>As a reproduction of a historical artifact this work may contain missing or blurred pages poor pictures errant marks etc. Scholars believe and we concur that this work is important enough to be preserved reproduced and made generally available to the public. We appreciate your support of the preservation process and thank you for being an important part of keeping this knowledge alive and relevant.</p><br>