Home equity conversion mortgages: The secondary market investor experience

摘要

Reverse mortgages are accrual notes of indeterminate maturity secured by home equity. In this paper, we analyze Fannie Mae's experience with the Home Equity Conversion Mortgage, the FHA-insured, non-recourse version of this product. Using loan and borrower characteristics, we model a number of relationships, including loss severity. We also show how the addition of credit information affects our models. Finally, we use credit data to conduct a policy experiment which illustrates how better screening might have affected portfolio performance. We find that imposing a minimum borrower credit score of 620 would have reduced originated volume by 23% and economic losses by 32%.