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Abstract
This article focuses on the use of reverse mortgages or home equity conversion mortgages (HECMs) to enhance retirement security. If present trends continue, many American households working today will face a significant retirement funding gap, and this study asks whether reverse mortgages can be used to fill at least some of this gap. The author describes the features and history of reverse mortgages; reviews the existing literature on the motivations people have to use their houses to pay for retirement expenses, especially for long-term services and supports; and, in original empirical simulations, finds that only 12%–14% of all retired households are suitable for, and might sensibly use, an HECM. He concludes with some public policy proposals to lower costs and increase demand for reverse mortgages, as well as to encourage their use to enhance retirement security.
TOPICS: Retirement, MBS and residential mortgage loans, legal/regulatory/public policy
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UK: 0207 139 1600