New Study Sheds Light on Seniors’ Reverse Mortgage Participation

Not only do seniors’ ages and net worth determine their eligibility for a reverse mortgage, but these factors also play a significant role in the likeliness of older households obtaining Home Equity Conversion Mortgages, a recent study suggests.

Past studies on reverse mortgage utilization have indicated that as much as 80% of seniors could benefit from getting a HECM, however, only about 2% of eligible elderly homeowners actually report borrowing agains their housing wealth.

Furthermore, while previous research has found that households with low incomes and modest wealth were most likely to benefit from reverse mortgages, the opposite may actually be true, according to research from the University of Georgia’s Department of Financial Planning, Housing and Consumer Economics, published in the International Journal of Financial Studies this month.


To determine the factors influencing elderly households’ participation in the reverse mortgage market, lead researcher Swarn Chatterjee used the 2012 Health and Retirement Study (HRS) for this empirical analysis, as well as to provide a nationally representative dataset of households age 50 and older.

The HRS dataset, which is maintained by the University of Michigan and is funded by the Social Security Administration and the National Institute of Aging, contains information on the respondents’ participation in the reverse mortgage market, as well as their household assets, and their demographic and socio-economic characteristics.

The HRS study included 10,625 respondents, however for the purposes of the University of Georgia’s reverse mortgage analysis, Chatterjee used homeowners age 62 and older. Age played a significant factor in the probability of having a reverse mortgage, with older adults more likely to have a HECM than their younger peers.

Seniors ages 74-79 had the highest likelihood of having a reverse mortgage (42%), followed by those ages 68-73 (36%) and 80-104 year-olds (13%). Meanwhile, the youngest cohort between ages 62-67 were least likely to have a reverse mortgage (9%).

“It is possible that at a later stage in their retirement many households understand the potential inadequacy in their retirement savings and thus explore options, including reverse mortgages, to supplement their income later in retirement,” Chatterjee writes.

While previous studies have suggested that reverse mortgages could be useful financial products for people with modest savings, poor health and unmarried people, the University of Georgia study finds that households with higher net worth, higher education levels and higher income were more likely to obtain reverse mortgages.

“The results of this study indicate that households with a greater stock of human capital—higher net worth, better educational attainment, and higher income—were more likely to have reverse mortgages,” Chatterjee writes.

As the Baby Boomer generation continues to age and enter retirement, reverse mortgages have the potential to benefit this large cohort of the American population. And as numerous retirement studies repeatedly underscored the financial unpreparedness of this group, the need for additional solutions and resources is now greater than ever.

A lack of awareness, however, continues to hamper reverse mortgage utilization among potential qualified seniors who would benefit from getting a HECM. The study’s authors conclude that further research is also needed to examine reverse mortgage awareness and demand for the HECM product.

“This provides an opportunity for financial planners, non-profits, the government, and advocacy groups for retirees to educate elderly households about the potential benefits and pitfalls of using reverse mortgages as a retirement tool,” Chatterjee writes.

Written by Jason Oliva

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  • Compare this story to the RMD story at

    As to a NCOA study claim of a significant shift in the average age of borrowers, the NCOA report and the UGA study linked in the post above are night and day and yet the periods under review are so close as to provide little statistical difference. The conclusions on an alleged downhill trend in age of borrowers in the NCOA study were less than reliable due to the unreliability of the FIT database, borrowers were getting significantly younger. As stated previously, it appears that the primary purpose of the study was simply to justify the use of FIT in counseling.

    It was obvious in analyzing HUD data, there was no major change in how the average age of the youngest borrowers was going down since the program started. In fact during the period in question, the downward trend was slowing down compared to prior periods.

    We as an industry should not be satisfied with weak studies and questionable data. As of yet no one has presented a critique of the UGA study. The age information in the UGA study more closely corresponds to the HUD supplied data than that provided by FIT.

    It is kind to call the NCOA Financial Interview Tool (FIT) a source of data of rather questionable quality. It is time to either substantially revise FIT or for HUD to send out a request for bids to competent programmers to create a more reliable system to gather data and provide guidance to counselees as to how to evaluate the origination of HECM in light of their facts and circumstances but it should be awarded to a firm working with financial planning rather than counseling those with debt troubles.

  • In looking at all these studies, I can say this. Since April 27, 2015 the whole playing field has changed!

    Our economic trends and uncertainties in the world scene has changed, especially over the past couple of years. When you look at the statistics quoted in the article, which I have repeated below:

    “Seniors ages 74-79 had the highest likelihood of having a reverse mortgage (42%), followed by those ages 68-73 (36%) and 80-104 year-olds (13%). Meanwhile, the youngest cohort between ages 62-67 were least likely to have a reverse mortgage (9%”

    How can we trust in these age scenarios. First off, take the age category of 62-67, people are working longer, one reason is that they have to, is due to economic hardships. Retirement is not the luxury it once was 50 years ago. This age bracket needs to be very concerned as age creeps up on them, their time is running out!

    The point I am trying to make is that this age group is where we have the most potential to reach and help them with their retirement needs. Whether it is to pay off mortgages, other debt, buy the car that is needed, but can’t afford to go into debt over ETC. Many of these people 62-67 are settling down, don’t want to be on he move any more, stabilization in their life’s are important.

    The line of credit is a great retirement cushion if there is funds left over after debt payoff or just a nest egg build up of growth dollars for when it is needed.

    Then we have the 68-73 age bracket. If seniors are at that age, have a degree of wealth and income, the reverse mortgage is a great leveraging tool against assets that can’t be touched with out penalties.

    As far as all those that are eligible, the 80% that could benefit from a reverse mortgage, of which only 2% take advantage of, we are not reaching out to them enough, especially in the right way.

    Today we do not have the outreach approach we once utilized. The news media can do only so much. We need to work heavily with financial partners that work with seniors on a daily basis. Banks, financial planners and advisors, attorneys, accountants and so on!

    We need to hold more community educational workshops and start teaming up with an elder law attorney and bring in a financial planner as well. Create a threesome to do the educational workshop. You can bet the local media will get behind it and you will have one heck of a success reaching many seniors along with families. Spend money, get a facility, have refreshments, it is not as much as you think when split three ways!

    We need to reach out and educate our seniors and the professionals that deal with. We need them know that a new reverse mortgage with more financial stability for all is here and here to stay!

    By the way, I want to take note of Jim Veale’s statistics, they are always great, I just come at it in a different way.

    John A. Smaldone

    • John,

      If you really want to reach those 62-67 but are starting when they are near or after reaching 62, you are too late. If you are targeting 62 year olds (for HECM purposes they are 62 for 6 months), you better be reaching out to them when they are in their mid to late fifties so that they have time to revise their financial planning.

      Financial planning is like a cruise ship. It is slow at maneuvering and needs lead time to get it done so that passengers and crew are not unduly inconvenienced.

      The trouble is marketing to that age group is costly with few, if any, origination prospects now (could be older spouses or referrals). So who wants to lay the ground work only to see it grabbed by someone else in the future?

      The real need is for lenders to finance this type of marketing and support those financially who are doing it. Within a few years, each such marketer should begin to be self supporting from the prospects they have garnered and from whom they are now reaping originations.

      Another approach is to have NRMLA run year round seminars for those 55 and older but not yet 62. The marketing and other costs could be paid for by a collaboration of lenders. How that would be received after the Extreme Summit debacle is hard to say.

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