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On the Efficient Design of the Reverse Mortgage: Structure, Marketing, and Funding
Robert C. Merton1; Rose Neng Lai2
2016-11
Conference Name52nd American Real Estate And Urban Economics Association (AREUEA) Annual Conference
Source PublicationProceedings of 52nd American Real Estate And Urban Economics Association (AREUEA) Annual Conference
Conference Date2016-11
Conference PlaceChicago, USA
Abstract

While aging population is a worldwide issue, it is more profound in Asia. Reverse mortgages are useful instrument to alleviate the continuous and steady consumption needs of retirees. The “puzzle” is why there has been rather modest uptake even in the US, UK, and Korea where it has been available for a considerable time. We propose a structural design for a reverse mortgage contract that works across geopolitical borders, including key design criteria, issues of education/marketing for both the retirees and their beneficiaries, and a feasible approach to funding reverse mortgage with reliable, cost-efficient supply of funds available consistently so that the reverse mortgages can be supported as a “standard” consideration for everyone considering for retirement. We will also examine the role of the government as regulator and as risk-bearing provider, in the reverse mortgage process. Our preliminary work suggests that an effective institutional means of funding reverse mortgages is likely to be considerable different from current practice. We also discuss how the possible obstacles, particularly Asian traditions, could be solved so as to allow reverse mortgage to be an instrument for improving retirement.

KeywordRetirement Reverse Mortgage Securitization, Tranching Core Capital
Fulltext Access
Document TypeConference paper
CollectionFaculty of Business Administration
DEPARTMENT OF FINANCE AND BUSINESS ECONOMICS
Affiliation1.Massachusetts Institute of Technology
2.University of Macau
Recommended Citation
GB/T 7714
Robert C. Merton,Rose Neng Lai. On the Efficient Design of the Reverse Mortgage: Structure, Marketing, and Funding[C],2016.
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