Reverse mortgages can help assure seniors’ financial well-being

by Ryan Smith16 Aug 2016
A new study from Ohio State University found that reverse mortgages can help seniors assure their financial well-being.

The study, performed under a grant from the Social Security administration, found that getting a reverse mortgage can be a smart move for seniors looking to ensure their financial security.

“Approximately 80% of households over the age of 62 own their own homes,” the study stated. “…Equity comprises a large portion of wealth for seniors.”

The study didn’t shy away from the controversy surrounding reverse mortgages. According to the authors, “Reverse mortgages are an important yet complex financial product serving a potentially vulnerable population.”

However, the study stated, “Since 2010, HUD has implemented a series of policy interventions with the intent of improving reverse mortgage decisions and outcomes.”

For instance, the study found that while cash-out and second-lien borrowers had an increased risk of foreclosure, HECM borrowers were “not significantly more likely to experience foreclosure.”

And the study found that the regulations put in place to govern reverse mortgages seem to be having the desired effect. For instance, the authors wrote, HECM lenders now have to assess a borrower’s ability to pay before offering a reverse mortgage.

“We estimate that the policy could reduce tax and insurance default by as much as 40%,” the authors wrote.



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