The Government’s Redesigned Reverse Mortgage Program

Alicia H. Munnell Steven A. Sass

IB#14-1

The brief’s key findings are:

  • Reverse mortgages, which allow retirees to tap their home equity, are insured by the government.
  • The financial crisis hurt both the government’s insurance fund and the borrowers.
    • Declining home prices led to losses when homes were sold.
    • More borrowers defaulted.
  • In response, the government has redesigned the program by:
    • creating a single loan option with a lower limit and fees;
    • limiting initial withdrawals; and
    • requiring financial assessments of borrowers.
  • These changes should help reduce pressure on the insurance fund and make defaults less likely.