March-April 2021

pipeline. I think that is an important issue that we need to continue to talk about and think about what can be done to stem losses on the properties that end up causing large draws on the Mutual Mortgage Insurance (MMI) fund. Lastly, there may be a better way to underwrite reverse mortgages. From what I understand, it is still a very manual process, but I wonder if it’s the most efficient process. Is there a way to better use credit data to automate the underwriting process, similar to forward mortgages? One of the things that we learned through our prior research is that if you have a credit score above a certain level, your risk of defaulting is low. Are there ways we can better incorporate credit scores or automated processes versus a very manual process? RM: HUD provided the data that you used to complete your research. I presume you shared the report with HUD, along with the other papers you have published over the years. What does HUD do with this informa- tion? Has any of your research led to HECM reforms? SM: All of our studies that use HUD data or that have been funded through our research grant from HUD’s Policy Development and Research division have been shared with HUD. They review the research before it is made public and offer comments. I cannot speak for HUD how the information is used internally. In one of our first research papers, we projected what the default rates for the 2006 to 2011 books of business would have looked like had a policy similar to Financial Assessment been in place. I think that research helped lend evidence to support the Financial Assessment policy that went into effect in 2015. RM: You also recently examined Home Mortgage Disclosure Act (HMDA) data collected by reverse mort- gage companies. What interesting trends did you learn? SM: Until recently, HMDA data had not systematically been collected on reverse mortgages or home equity lines of credit. We were excited to see and learn what we could from these new data. It was just origination data, but it was interesting to see that the primary reason older adults are denied HELOCs and other types of forward mortgages was because they had a high debt- to-income ratio. That seems solvable from a reverse mortgage standpoint; however, you still need to have enough equity in the home to make the reverse mortgage work if you are paying off a forward mortgage. We ran a simulation of older people who were denied forward mortgages and found that about a third of them would have qualified for a reverse mortgage. That still means two-thirds still did not have sufficient home equity to get a reverse mortgage. Many of these people are highly leveraged. Having adequate equity could be a major barrier to getting a reverse mortgage. RM: Thank you for your time. To conclude, what other reverse mortgage research topics would you like to focus on in the near future? SM: I’d like to better understand how the use of home equity in retirement can help if someone has had a health shock. We know that paying for health expenses is not the number one reason why people take out a reverse mortgage, but once they originate a reverse and they have access to home equity, does that end up allowing them to buffer health shocks in the future? And then what about somebody who’s already gotten a reverse mortgage at age 62, has no proceeds left, and has a health shock at age 72 and they have no equity left to buffer that shock? It goes both ways. A lot of folks in survey data say the reasons for not borrowing from home equity is in part because they want to hold onto it in case a health shock occurs in the future. Some people view their home as precautionary savings against future health shocks. But we do not know as much about what happens if they do use home equity to help pay for a health shock. Do we see positive outcomes that might not have otherwise occurred? So, we would like to link data on reverse mortgages and home equity borrowing more generally to data on health outcomes and observe how health outcomes change for people who are able to access equity relative to those who are not able to access equity. From the Top continued from page 13 From the Top 14 REVERSE MORTGAGE / MARCH-APR I L 2021