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The goal of Cityscape is to bring high-quality original research on housing and community development issues to scholars, government officials, and practitioners. Cityscape is open to all relevant disciplines, including architecture, consumer research, demography, economics, engineering, ethnography, finance, geography, law, planning, political science, public policy, regional science, sociology, statistics, and urban studies.

Cityscape is published three times a year by the Office of Policy Development and Research (PD&R) of the U.S. Department of Housing and Urban Development.

  • Home Equity Conversion Mortgages
  • Volume 19, Number 1
  • Managing Editor: Mark D. Shroder
  • Associate Editor: Michelle P. Matuga

Reverse Mortgage Collateral: Undermaintenance or Overappraisal?

Kevin A. Park
U.S. Department of Housing and Urban Development

Opinions expressed in this article are those of the author and do not necessarily reflect the views and policies of the U.S. Department of Housing and Urban Development or the U.S. government.

Using information on mortgages insured by the Federal Housing Administration, this article examines the disproportionate decline in collateral values associated with reverse mortgages. Properties securing reverse mortgages sell at a sharp discount in foreclosure relative to similar properties securing forward purchase loans. This discount, however, does not increase over time as expected of depreciation related to property undermaintenance. Further, a similar discount is observed on forward refinance loans. An overestimate of the collateral value at origination, rather than subsequent level of property maintenance, may be responsible for greater-than-expected loss severities.

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Note: Guidance documents, except when based on statutory or regulatory authority or law, do not have the force and effect of law and are not meant to bind the public in any way. Guidance documents are intended only to provide clarity to the public regarding existing requirements under the law or agency policies.