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Re-Evaluating the Major Factors in the Low Origination Rate of the Reverse Mortgage Market

Author

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  • Wei-Han Liu

    (Department of Finance, Southern University of Science and Technology, 1088 Xueyuan Avenue, Shenzhen 518055, P. R. China)

Abstract

We reinvestigate the major factors in the low origination rate of home equity conversion mortgages (HECMs) in the United States from 2010 to 2017. We use panel data analysis to consider the variation in time and region and investigate the main determinants of the HECM origination rate. We examine five categories of variables: demographics, home equity, home debt level, retirement income, and taxes. We first filter out key variables and then consider the interactions among these factors. The empirical outcomes confirm the significance of including interactions and provide detailed observations to resolve several disputed issues and make policy recommendations, such as debt priority of mortgage and credit card, applying HECM as a personal or household decision, and the dominance of property tax over inheritance tax.

Suggested Citation

  • Wei-Han Liu, 2023. "Re-Evaluating the Major Factors in the Low Origination Rate of the Reverse Mortgage Market," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 26(02), pages 1-26, June.
    • Handle: RePEc:wsi:rpbfmp:v:26:y:2023:i:02:n:s0219091523500145
    DOI: 10.1142/S0219091523500145
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    Keywords

    Home Equity Conversion Mortgages; origination rate; panel data analysis;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

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