Data Confirms Reverse Mortgage Borrowers Have Little Wealth Outside Home

According to recent research data, despite some of today’s reverse mortgage efforts targeted toward a population that is using home equity as a comprehensive planning tool, the borrower demographic of the past still holds true: borrowers of Home Equity Conversion Mortgages (HECMs) are made up of a major segment of primarily low-income individuals with little wealth outside of their homes.

This is according to research cited by Dr. Edward Seiler, economist with Dworbell, Inc. in a presentation given at the National Reverse Mortgage Lenders Association (NRMLA) Eastern Regional Meeting last month in New York City.

Low-income, low wealth

When examining the borrower profile cultivated by absorbing multiple research papers on the subject, Seiler found that the longstanding perceptions about HECM borrowers still manage to hold true today.


“I think the old adage of borrowers having lower incomes and fewer assets outside the home and equity to tap was confirmed by this data,” Seiler said in an interview with RMD following his presentation. “That was comforting, because people talk about that all the time, they wonder if it’s anecdotal or real, so it’s good to confirm that.”

In a 2017 research paper cited by Seiler and authored by Stephanie Moulton, Cäzilia Loibl and Donald Haurin, data on 1,761 households that received HECM counseling was cross-referenced with the University of Michigan’s Health and Retirement Study (HRS) to paint a demographic picture of reverse mortgage borrowers.

Among some of the interesting data points yielded in the paper are that those with private long‐term care insurance are 67 percent less likely to have a reverse mortgage. So are married homeowners, who are 40 percent less likely to have a reverse mortgage.

Higher education, risk-averseness and marital status

Also included in the demographic data is a relationship between the education levels of borrowers, and their likelihood in engaging in a reverse mortgage.

“I think what’s interesting as well is in education levels, that relatively more college graduates are using reverse mortgages,” Seiler told RMD.

Homeowners that have either partially or fully completed their college educations are up to twice as likely to have a reverse mortgage as their counterparts who did not complete high school, based on the same 2017 data. Also enlightening is that households with reverse mortgages are more risk averse, and are likely to have prepared a five- (or more) year financial plan, according to 2016 research conducted by Swarn Chatterjee for the International Journal of Financial Studies. Based on that data, risk-averse respondents are 44 percent more likely to have a reverse mortgage than those who are not.

“I find it interesting that non-married people, and non-married males especially were going for reverse mortgages. The main interest, though, is the relationship between LTC insurance and reverse mortgages and activities of daily living, and that the borrowers are more risk-averse and generally have more financial plans in place than non-borrowers.”

Borrower health, long-term care

HECM borrowers are generally healthy people, Seiler shared, based on Moulton’s research when matched with Health and Retirement Study data for reverse mortgage-eligible households. People with a lot of activities of daily living (ADL) are less likely to take a HECM, which includes people who have more health problems. People with long-term care (LTC) insurance are also two-thirds less likely to take out a HECM because LTC insurance costs have increased significantly relative to life insurance costs.

When asked by an audience member at the conference if Medicare Advantage (MA) will make LTC insurance more available, Seiler indicated that based on the information he’s reviewed, it’s possible.

“It depends on how they’re able to finance it,” Seiler answered. “A lot of these people don’t have a way of financing Medicare Part C. But, it would be nice if it was bundled in, because people ask themselves how they’re supposed to pay for long-term care. Using home equity could be a possibility, and Medicare Advantage could be very advantageous for the HECM market.”

As recently as April 2019, changes made to the Medicare Advantage program will allow private MA plans to expand the scope of their coverage starting in calendar year 2020, including new additions for chronically ill enrollees that could allow for non-medical expenditures, including home modification, as well as long-term care insurance.

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    What I have been saying for over 5 years has been confirmed.

    The reverse mortgage was designed and is perfectly structured to benefit financially strapped seniors who actually need it (representing over 80% of the senior population) vs. the much smaller audience of wealthy seniors who have financial planners (representing less than 20% of the senior population) who don’t need it!



    How many of those seniors do you think have financial planners?

    How about NONE!

    If you have no money or assets then there is no plan.

    Let me say that in another way for those who maybe still don’t get it.

    Why so many in our industry have placed such a high value on trying to convince financial planners “who represent less than 20% of seniors, most of whom do not need a reverse mortgage” as opposed to advertising and directly marketing to the larger audience representing 80% of seniors who actually need the product, defies all common sense logic.

    Especially since the majority of financial planners can’t stand our industry in the first place and many who work for larger wealth management firms are strictly forbidden from suggesting reverse mortgages to their clients.

    I was featured in a reverse mortgage daily article a while back regarding this very issue.

    One would think that by now one would recognize that this financial planner referral sales strategy has failed miserably.

    But noooooooo, lets run some more articles about the benefits of the financial planners.

    Seriously though, the sooner that many in our industry accept the fact that the reverse mortgage is better suited for the “Average Joe” senior who needs it and abandons this ridiculous financial planner referral sales strategy, the better off our industry will be.

    It doesn’t work, let it go!

    Hopefully, now reverse mortgage daily will STOP running so many articles about the benefits of financial planners and START running articles about how lenders should spend some money on advertising to market directly to the larger audience of seniors who actually need the reverse mortgage to live a better quality of life.

    Then our industry will finally see some growth in volume.

    Somehow, I still think my message wasn’t clear enough for many?


  • Kevin,u

    As to what is presented in the article you are correct. Unfortunately as to the characteristics of current HECM borrowers, the presentation made by Edward Seiler was based on old data. The primary research upon which he depended as to describing HECM borrowers was a study performed by Stephanie Moulton and others which was published in 2017, based on data collected for a research study published in 2015.

    The sample collected for the Moulton analysis published in 2015 was taken from just one counseling agency. The sample included less than 1,800 counselee households from counseling sessions performed during the 6 year period beginning with 2006 and ended with 2011. So the oldest data is about 13 years old and the most recent is over 7 years old.

    Most significantly, none of the data comes from borrowers who have obtained their HECMs after September 29, 2013. Edward confirmed this over the phone earlier this week.

    So as to current HECM borrowers, your conclusions are not verified by current research. There is now talk of a new study that will describe borrowers at least through 2017. Yet like the data Stephanie Moulton relied upon, the data is questionable since it comes from counseling not HUD. Even HUD sourced data on the financial situation of borrowers is questionable as originators are instructed to stop gathering income and asset (other than the principal residence) data on borrowers once it is clear the income and related assets of applicants are sufficient to qualify for the reverse mortgage they are applying for. So even though there is a verification process as to the information included on HUD Form 1009 since April 27, 2015, it is less than clear if all of the data needed to make reliable conclusions about the financial situation of HECM and other reverse mortgage applicants.

    The one thing that seems to be anecdotally agreed to is that most HECM borrowers get their HECM to pay off a current mortgage.

    So again your conclusions may be right as to current borrowers and potentially eligible prospects but they also may be very wrong. Due to the HECM changes made by HUD effective on 9/30/2013, 4/27/2015, and 10/2/2017, I believe that the financial characteristics of current reverse mortgage borrowers have significantly changed from the picture provided by Edward Seiler.

    HOWEVER, continue marketing where you find the greatest success and that also provide real financial benefit to the borrower currently and in the long run. Those who do otherwise do so at their own detriment.

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