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Risk and the Home Equity Conversion Mortgage

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Author Info
Edward J. Szymanoski
Abstract

This article analyzes the risks involved with reverse mortgage insurance and explains the pricing model developed for the Home Equity Conversion Mortgage (HECM) demonstration. The paper demonstrates how borrower longevity, interest rates and property value changes all affect pricing, and why the HECM model focuses on property value as the primary source of uncertainty. It goes on to explain why a random walk specification was chosen to forecast property values, and how the principal limit factors, which determine cash payments to borrowers in the HECM program, are calculated. Copyright American Real Estate and Urban Economics Association.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/1540-6229.00637
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Publisher Info
Article provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.

Volume (Year): 22 (1994)
Issue (Month): 2 ()
Pages: 347-366
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:bla:reesec:v:22:y:1994:i:2:p:347-366

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1080-8620

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  1. M. Shahid Ebrahim, 2008. "Can an Islamic Model of Housing Finance Cooperative Elevate the Economic Status of the Underprivileged?," Papers on Economics of Religion 08/04, Department of Economic Theory and Economic History of the University of Granada.. [Downloadable!]
  2. Buckley, Robert & Cartwright, Kim & Struyk, Raymond & Szymanoski, Edward, 2003. "Integrating housing wealth into the social safety net : the elderly in Moscow," Policy Research Working Paper Series 3115, The World Bank. [Downloadable!]
  3. Olivia S. Mitchell & John Piggott, 2004. "Unlocking Housing Equity in Japan," NBER Working Papers 10340, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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