IDEAS home Printed from https://ideas.repec.org/a/jre/issued/v39n12017p99_126.html
   My bibliography  Save this article

The Role of Appreciation and Borrower Characteristics in Reverse Mortgage Terminations

Author

Listed:
  • Thomas Davidoff

    (University of British Columbia)

  • Gerd M. Welke

    (California State Polytechnic University)

Abstract

The Federal Housing Administration ("FHA") insures Home Equity Conversion Mortgage ("HECM") lenders against shortfalls between loan balances and collateral value. Because borrowers may defer repayment until they move out of their homes or die, FHA loses money on HECM loans when borrowers remain in their homes for a long time or prices fall. We show that there is an economically large and positive correlation between reverse mortgage terminations and home price appreciation. Consistent with intuition derived from a simple life-cycle model, we find the relationship between appreciation and termination weakens with borrower age, and appears to weaken with borrower wealth.

Suggested Citation

  • Thomas Davidoff & Gerd M. Welke, 2017. "The Role of Appreciation and Borrower Characteristics in Reverse Mortgage Terminations," Journal of Real Estate Research, American Real Estate Society, vol. 39(1), pages 99-126.
    • Handle: RePEc:jre:issued:v:39:n:1:2017:p:99_126
    as

    Download full text from publisher

    File URL: http://pages.jh.edu/jrer/papers/pdf/past/vol39n01/9869-04.99_126.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Steven Caudill & Claudio Detotto & Dominique Prunetti, 2020. "Bargaining power in apartment sales in Corsica: A latent class approach," Urban Studies, Urban Studies Journal Limited, vol. 57(13), pages 2754-2772, October.
    2. Yung-Tsung Lee & Tianxiang Shi, 2022. "Valuation of Reverse Mortgages with Surrender: A Utility Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 65(4), pages 593-621, November.
    3. Shi, Tianxiang & Lee, Yung-Tsung, 2021. "Prepayment risk in reverse mortgages: An intensity-governed surrender model," Insurance: Mathematics and Economics, Elsevier, vol. 98(C), pages 68-82.
    4. Begley, Jaclene & Fout, Hamilton & LaCour-Little, Michael & Mota, Nuno, 2020. "Home equity conversion mortgages: The secondary market investor experience," Journal of Housing Economics, Elsevier, vol. 47(C).

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jre:issued:v:39:n:1:2017:p:99_126. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: JRER Graduate Assistant/Webmaster (email available below). General contact details of provider: http://www.aresnet.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.