Federal Reserve Paper Looks At History Of Reverse Mortgages

Interested in the history of reverse mortgages and data from nearly the past 20 years of the program?  The report, Reversing the Trend: The Recent Expansion of the Reverse Mortgage Market is the first paper to perform such analyses using actual loan-level reverse mortgage data and was recently published by Federal Reserve Board and covers data from 1989 to 2007.  One of the trends identified as part of the report is that borrowers who either take a line of credit, are single male borrowers or borrowers with higher home values tend to exit/payoff reverse mortgages sooner than the rest of the populations.  As reverse mortgages gain exposure in the market place, the author notes that today’s reverse mortgage borrowers are younger than they traditionally have in the early years of the program and that seniors under 62 may be interested in reverse mortgages if available. 

One of the most common complaints about reverse mortgages are the upfront fees involved and how many believe that these loans are a bad deal for elderly homeowners.  The author, HuiShan, explains that the upfront costs are necessary because “because there is little risk-pooling in the HECM program, insurance premiums have to be high for HUD to break even.”