The unfulfilled promise of reverse mortgages: Can a better market improve retirement security?

Mark Findlay and his wife Delores Findlay, of Erie, Pennsylvania, read the morning newspaper inside their home at Limetree Park where they spend the winter months in Bonita Springs, Florida, March 23, 2012. Medicare and Social Security, the massive programs that pay benefits to tens of millions of older Americans, are contentious issues in the 2012 presidential campaign. Seniors want the nation?s sputtering economy to be fixed, but not at their expense.   REUTERS/Steve Nesius  (UNITED STATES - Tags: ELECTIONS POLITICS SOCIETY) - TM3E846043F01
Editor's note:

This report was produced in concert with the event, “Reverse mortgages: Promise, problems, and proposals for a better market” held October 28, 2019 and co-sponsored by Brookings and the Kellogg Public-Private Initiative. The other reports from the event discuss unlocking housing wealth and annuity enhanced reverse mortgage loans.


With the gradual disappearance of private-sector pensions and gradually increasing life expectancy, Americans must increasingly take responsibility for managing their own retirement. Many older households end their working years with limited financial resources, but have accumulated substantial equity in their homes—making home equity a potential source of retirement income. Reverse mortgages offer one avenue for accessing this equity, offering homeowners the ability to borrow against their home and defer payment until they exit the property. Yet, while this strategy shows promise in theory for select retirees, few homeowners ever take this option.  This framing paper summarizes recent developments in the reverse mortgage market, discusses why so few people use these instruments, and lays out the merits and drawbacks to including these products in a retirement portfolio. It is issued simultaneously with studies by Stephanie Moulton and Donald Haurin and by Thomas Davidoff that propose reforms to improve the reverse mortgage market.