Demographic Profiles of Elderly Homeowners in Poverty Who Can Gain from Reverse Mortgages

Abstract:     
This paper studies the demographic profiles of elderly homeowners in the United States who are in poverty, and who can use reverse mortgages to raise their economic status. The Home Equity Conversion Mortgage (HECM) reverse mortgage is simulated using the HECM Worksheet Program and the American Housing Survey of 1991 data in order to compute the magnitude of gains from reverse mortgages. The demographic profiles of households who gain from reverse mortgages are developed in terms of age, household type, race or ethnicity, region, and location. The demographic profiles reveal that households headed by divorced, widowed, or separated women constitute a large majority of homeowners in poverty with potential gains from reverse mortgages. Results from an analytical model of the determinants of potential gains from reverse mortgages indicate that such gains are systematically higher for -- households headed by never-married males, and by divorced, widowed, or separated females; whites compared to African-Americans; households in Northeastern and Southern urban suburbs; and those who do not receive public assistance.

JEL Classifications: R2, J1, I3

Working Paper Series