REVERSE MORTGAGES AND THE LIQUIDITY OF HOUSING WEALTH

Housing wealth constitutes most of the non-pension wealth of the elder ly population. This study analyzes the potential of reverse mortgages to increase the income and liquid wealth of the elderly by identifying households with relatively high levels of housing equity. Because thi s article looks at the whole distribution of elderly households and co nsiders debt as well as income, it finds a larger potential market for reverse mortgages than previous studies. Calculations from the 1990 S urvey of Income and Program Participation and Census population estima tes show that over six million homeowners in the United States could i ncrease their effective monthly income by at least 20% by using a reve rse mortgage. Of these, more than 1.3 million have no children. Furthe rmore, a reverse mortgage would allow over 1.4 million poor elderly pe rsons to raise their incomes above the poverty line.