ERIC Number: ED312532
Record Type: Non-Journal
Publication Date: 1986
Reference Count: N/A
Home Equity Conversion for the Elderly: An Analysis for Lenders.
This report was prepared to explain home equity conversion (HEC), a means whereby elderly persons can convert the wealth represented by homeownership into a flow of income. It focuses exclusively on arrangements that convert residential equity into discretionary cash. The introduction reviews the recent history of HEC in the United States. A section on types of reverse mortgages explains that all reverse mortgages are rising-debt loans, and that types of reverse mortgages differ primarily in how interest is calculated or charged, how the term is determined, and how disbursements are established. Various types of reverse mortgages are described and discussed. Different characteristics of reverse mortgages and sale leasebacks are analyzed in terms of their effects on homeowner income and rate of return to the lender. The next section examines the technical specifications of various HEC instruments. Descriptions of instruments are sufficiently detailed to enable lenders to understand how payments, the loan balance, the terms to maturity, and other loan parameters of reverse mortgages interact, and how different combinations of the variables affect the rate of return to the lender. Lender and borrower risks associated with reverse mortgages are discussed, as are lender and borrower benefits. The final section considers the future of reverse mortgage lending. (NB)
American Association of Retired Persons, 1909 K Street, N.W., Washington, DC 20049 (Free).
Publication Type: Information Analyses; Guides - Non-Classroom
Education Level: N/A
Authoring Institution: American Association of Retired Persons, Washington, DC.