Reducing Default Rates of Reverse Mortgages

IB#16-11

The brief’s key findings are:

  • In any loan program, a key objective is balancing the twin goals of high take-up rates and low default rates.
  • In 2013, the federal government announced new rules to curb default rates of reverse mortgages by limiting initial withdrawals and requiring underwriting.
  • To assess the effects of the new rules, this analysis uses a unique dataset linking borrower characteristics to their loan activity.
  • The results show that the new rules could reduce default rates by up to 50 percent, with only a small impact on take-up.