Reverse Mortgage Collateral: Undermaintenance or Overappraisal?

Posted: 6 Apr 2017

See all articles by Kevin A. Park

Kevin A. Park

Federal National Mortgage Association (Fannie Mae)

Date Written: April 1, 2017


Using information on mortgages insured by the Federal Housing Administration, this article examines the disproportionate decline in collateral values associated with reverse mortgages. Properties securing reverse mortgages sell at a sharp discount in foreclosure relative to similar properties securing forward purchase loans. This discount, however, does not increase over time as expected of depreciation related to property under maintenance. Further, a similar discount is observed on forward refinance loans. An overestimate of the collateral value at origination, rather than subsequent level of property maintenance, may be responsible for greater-than-expected loss severities.

Keywords: Federal Housing Administration, FHA, Reverse Mortgage, Home Equity Conversion Mortgage, HECM, Appraisal, Maintenance, Property

JEL Classification: R3, R30, R38, G18, G22, G28

Suggested Citation

Park, Kevin Alan, Reverse Mortgage Collateral: Undermaintenance or Overappraisal? (April 1, 2017). Cityscape, Vol. 19, No. 1, 2017, Available at SSRN:

Kevin Alan Park (Contact Author)

Federal National Mortgage Association (Fannie Mae) ( email )

3900 Wisconsin Avenue, NW
Washington, DC 20016-2892
United States

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