Preliminary Evaluation of the Hecm Reverse Mortgage Program

46 Pages Posted: 11 May 2000

See all articles by Brad Case

Brad Case

Fannie Mae

Anne B. Schnare

Federal Home Loan Mortgage Corporation (FHLMC)


This paper describes and evaluates the Home Equity Conversion Mortgage (HECM) Insurance Demonstration, designed to encourage the development of private reverse mortgage programs by insuring lenders against the risks associated with new mortgage lending programs and with reverse mortgages in particular. The paper evaluates demand for the program by analyzing the attributes of participating borrowers, their properties and the types of payment options chosen. It also presents several observations regarding participation by the financial community in the HECM demonstration, required counseling and legal and regulatory issues that may hamper the growth and development of reverse mortgage programs in general. The findings suggest strong demand for reverse mortgages among "house-rich, cash- poor" elderly homeowners, either to supplement inadequate current incomes or to provide a reserve against unexpected lump-sum expenses. The flexible design of the HECM program addresses a wide variety of borrower financial needs, even though it imposes higher costs on lenders and servicers. The continued growth of the program, however, is hindered by a shortage of qualified housing counselors in some areas, as well as by a variety of legal and regulatory barriers.

JEL Classification: D1, G21, M00

Suggested Citation

Case, Bradford and Schnare, Anne B., Preliminary Evaluation of the Hecm Reverse Mortgage Program. Journal of American Real Estate and Urban Economics Association, Vol. 22, No. 2, Summer 1994, Available at SSRN:

Bradford Case (Contact Author)

Fannie Mae ( email )

3900 Wisconsin Avenue, NW
Washington, DC 20016-2892
United States
202-752-4221 (Phone)

Anne B. Schnare

Federal Home Loan Mortgage Corporation (FHLMC)

8200 Jones Branch Road
McLean, VA 22101
United States

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