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Reverse mortgages and senior property tax relief

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  • Miller, Joshua J.
  • Nikaj, Silda
  • Lee, Jin Man

Abstract

Home Equity Conversion Mortgage (HECM) loans experience high rates of property tax default (IFE, 2016; CFPB, 2012). Given tax burden is predictive of default (Moulton et al., 2015), it is important for HECM participants to take advantage of available property tax relief programs. To examine participation in property tax relief programs, we match loan-level HECM origination records with local administrative tax records for properties in Chicago, IL. We find that nearly 40% of eligible HECM borrowers do not participate in a senior tax relief program for which they meet all eligibility requirements. Further, we find that senior tax relief participation is associated with a reduced probability of property tax default of 60%.

Suggested Citation

  • Miller, Joshua J. & Nikaj, Silda & Lee, Jin Man, 2019. "Reverse mortgages and senior property tax relief," Journal of Housing Economics, Elsevier, vol. 44(C), pages 26-34.
    • Handle: RePEc:eee:jhouse:v:44:y:2019:i:c:p:26-34
    DOI: 10.1016/j.jhe.2018.12.001
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    References listed on IDEAS

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    1. DeBoer, Larry & Conrad, James, 1988. "Do High Interest Rates Encourage Property Tax Delinquency," National Tax Journal, National Tax Association;National Tax Journal, vol. 41(4), pages 555-560, December.
    2. Hui Shan, 2011. "Reversing the Trend: The Recent Expansion of the Reverse Mortgage Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 39(4), pages 743-768, December.
    3. Nathan B. Anderson & Jane K. Dokko, 2016. "Liquidity Problems and Early Payment Default among Subprime Mortgages," The Review of Economics and Statistics, MIT Press, vol. 98(5), pages 897-912, December.
    4. Moulton, Stephanie & Haurin, Donald R. & Shi, Wei, 2015. "An analysis of default risk in the Home Equity Conversion Mortgage (HECM) program," Journal of Urban Economics, Elsevier, vol. 90(C), pages 17-34.
    5. Robert J. Shiller & Allan N. Weiss, 2000. "Moral Hazard in Home Equity Conversion," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(1), pages 1-31.
    6. Donald R. Haurin & Stuart S. Rosenthal, 2007. "The Influence of Household Formation on Homeownership Rates Across Time and Race," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(4), pages 411-450, December.
    7. DeBoer, Larry & Conrad, James, 1988. "Do High Interest Rates Encourage Property Tax Delinquency," National Tax Journal, National Tax Association, vol. 41(4), pages 555-60, December.
    8. Deng, Yongheng & Quigley, John M. & Van Order, Robert & Mac, Freddie, 1996. "Mortgage default and low downpayment loans: The costs of public subsidy," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 263-285, June.
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    Cited by:

    1. Carole Bernard & Adam Kolkiewicz & Junsen Tang, 2023. "Valuation of Reverse Mortgages with Default Risk Models," The Journal of Real Estate Finance and Economics, Springer, vol. 66(4), pages 806-839, May.

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