Seniors’ Home Equity Extraction: Credit Constraints and Borrowing Channels

35 Pages Posted: 4 Feb 2016 Last revised: 25 Jun 2019

See all articles by Stephanie Moulton

Stephanie Moulton

Ohio State University- John Glenn College of Public Affairs

Samuel Dodini

Cornell University, College of Human Ecology, Students

Donald R. Haurin

Ohio State University (OSU) - Economics

Maximilian D. Schmeiser

Amazon Lending

Multiple version iconThere are 2 versions of this paper

Date Written: May 20, 2019

Abstract

Households borrow against home equity through different types of mortgages: closed end home equity loans or revolving lines of credit, cash-out refinancing, and—for senior homeowners—reverse mortgages. The objective of this study is to identify how borrowing constraints and the lending environment affect the rate of seniors’ home equity borrowing and their choice of mortgage product. Ours is the first study to model the choice of reverse mortgages alongside other modes of equity borrowing. During the house price boom (2001-2007), we find that credit constrained areas display higher rates of home equity borrowing than less constrained areas as home equity levels increase for cash-out refinancing and reverse mortgages. During the recovery period (2010-2015), we observe this relationship only for reverse mortgage borrowing, consistent with tightened underwriting for forward mortgage loans.

Keywords: equity extraction, mortgages, home equity, household finance, reverse mortgages

JEL Classification: D12, R21, G21, J14

Suggested Citation

Moulton, Stephanie and Dodini, Samuel and Haurin, Donald R. and Schmeiser, Maximilian D., Seniors’ Home Equity Extraction: Credit Constraints and Borrowing Channels (May 20, 2019). Available at SSRN: https://ssrn.com/abstract=2727204 or http://dx.doi.org/10.2139/ssrn.2727204

Stephanie Moulton (Contact Author)

Ohio State University- John Glenn College of Public Affairs ( email )

110 Page Hall
1810 College Road
Columbus, OH 43210
United States

Samuel Dodini

Cornell University, College of Human Ecology, Students ( email )

Ithaca, NY
United States

Donald R. Haurin

Ohio State University (OSU) - Economics ( email )

154 N. Oval Mall
1010G Derby Hall
Columbus, OH 43210-1172
United States
614-292-0482 (Phone)
614-292-9530 (Fax)

Maximilian D. Schmeiser

Amazon Lending ( email )

Seattle, WA 98144
United States

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