Can “high costs” justify weak demand for the Home Equity Conversion Mortgage?
T Davidoff - The Review of Financial Studies, 2015 - academic.oup.com
Abstract Home Equity Conversion Mortgages (“HECMs”) implicitly bundle nondefaultable
credit lines with put options that let borrowers, or their heirs, sell mortgaged homes for the
credit line limit when borrowers move or die. The put option's value, net of closing costs,
bounds HECM's value to borrowers below. Older homeowners' weak demand is commonly
attributed to HECM's “high costs,” and the government prices insurance intending to avoid
subsidy. However, simulations indicate put value has often exceeded closing costs, even …
credit lines with put options that let borrowers, or their heirs, sell mortgaged homes for the
credit line limit when borrowers move or die. The put option's value, net of closing costs,
bounds HECM's value to borrowers below. Older homeowners' weak demand is commonly
attributed to HECM's “high costs,” and the government prices insurance intending to avoid
subsidy. However, simulations indicate put value has often exceeded closing costs, even …
Can" high costs" justify weak demand for the home equity conversion mortgage
T Davidoff - 2013 - academic.oup.com
… E41 - Demand for Money … Q31 - Demand and Supply; Prices … E41 - Demand for Money …
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