Consumer advocacy groups and the federal government have warned about scams and predatory lending connected to reverse mortgages, especially since these products are targeted at older borrowers. In addition, researchers have reported ꦡracial gaps in access to and use of t🐓his financial tool, with White and Black homeowners being more likely to utilize them.

Given the risi♛ng racial wealth gap and the strong link between property ownership and wealth in the United States, what part reve♛rse mortgages play in shaping this situation—and how they reflect other societal and structural differences—is worth asking.

Use of Reverse Mortgages by Race

A 2020 article from the Urban Institute, a social policy think tank, a Washington, D.C.-based social policy think tank, laid out the demographics of HECM borrowers, relying on data released as part of the Home Mortgage Disclosure Act, a law passed by Congress in 1975 to give consumers access to mortgage data.

Urban Institute researchers Karan Kaul, Sarah Strochak, and Laurie Goldman found that the popularity of 澳洲幸运5开奖号码历史查询:reverse mortgages varies by race. Specifically, in 2018, White and Black homeowners made up a larger share of reverse mortgage lendi꧅ng than of forward home equity lending. Hispanic and Asian homeowners, in contrast, made up a larger share of forward 澳洲幸运5开奖号码历史查询:home equity lending than of reverse mortgages.

The researchers also pointed out that the number of reverse mortgages was surprisingly low. With older homeowners holding a large amount of 澳洲幸运5开奖号码历史查询:housing wealth and anxious about finances, they noted that the decline in reverse mortgages from 2011 to 2018 was counterintuitive.

From 2018 to 2020, appreciating home prices and low home mortgage interest rates enticed more homeowners to unlock the equity in their homes, another Urban Institute report indicated. But nearly all of the increase in equity lending went to White homeowners. In contrast, equity loans to Black homeowners declined, threatening to intensify the racial wealth gap.

Disparate Effects?

Reverse mortgages may be understudied, but there’s reason to believe that ther🌼൲e’s a disparate racial impact.

In another review of data released from the Home Mortgage Disclosure Act, researchers affiliated with Howard University found “significant lending disparities” in the 澳洲幸运5开奖号码历史查询:underwriting decisions on reverse mortgages related to race/ethnicity, as well as other factors, such as gender and age. The odds of being denied a loan were 107% and 48% higher, respectively, for Black and Hispanic homeowners than for White homeowners, according to the report.

Beyond the possibility of disparate denials, researchers posit that reverse mortgages further social inequalities, in p﷽art because the reasons for taking out a reverse mortgage vary from peཧrson to person.

As an example, a Yale University research paper by Danya E. Keene, Ann Sarnak, and Caitlyn Coyle found that the decision to take out a reverse mortgage can “reproduce” social inequalities. The underlying structural makeup of society influences individual decisions about whether to take out a reverse mortgage, the study indicated, bringing into play concerns about intergenerational wealth and structural hurdles. 

For some, reverse mortgages are tools that can be useful to get as much as possible from your home equity, the report concluded. It quoted Cathy, a Black homeowner who had been denied a traditional 澳洲幸运5开奖号码历史查询:home equity loan, and who used a reverse mortgage to “enjoy her own equity.” For others, the report said, reverse mortgages are a last refuge, used to prevent losing their home. On this point, it cited Adanna, a Black widow who had taken out a reverse mortgage to stave off 澳洲幸运5开奖号码历史查询:foreclosure.

The Bottom Line

Reverse mortgages are one way for homeowners to access capital using their home equity. There are others, including 澳洲幸运5开奖号码历史查询:cash-out refinances, home equity loans, and home equity lܫines of credit (🐼HELOCs). Given the rising number of older people in the U.S., this tool will likely remain relevant for some time. Since there are signs that race may impact the granting of these loans, the topic bears further investigation.