MacArthur Foundation Awards Ohio State $427,000 Grant to Analyze the Use of Reverse Mortgages and Its Impact on Older Adults

March 15, 2012

Editor: This news release also has been distributed by Ohio State's John Glenn School of Public Affairs.

COLUMBUS, Ohio -- A research team led by Stephanie Moulton, an assistant professor at the John Glenn School of Public Affairs at The Ohio State University, was awarded one of five competitive grants from the John D. and Catherine T. MacArthur Foundation for research to explore the relationships between housing and social and economic outcomes for families and communities.

The $427,000 grant will be used to fund a three-year study that will provide a better understanding of whether, and under what circumstances, reverse mortgages lead to increased financial security, well-being and independence in older age.

Co-investigators on the project include Caezilia Loibl, associate professor at the College of Education and Human Ecology; Loibl also has appointments with Ohio State University Extension and the Ohio Agricultural Research and Development Center. Other co-investigators are Jason Seligman, assistant professor at the John Glenn School of Public Affairs; Don Haurin, professor in the Department of Economics; and J. Michael Collins, faculty director of the Center for Financial Security and assistant professor in consumer sciences at the University of Wisconsin, Madison.

Reverse mortgages are a special type of mortgage that allows senior homeowners to convert a portion of their home equity into cash. Reverse mortgages are often promoted to help “cash poor but house rich” seniors retain affordable, stable housing, thereby realizing benefits of homeownership later in life. However, reverse mortgages are complex and costly financial products, and little is known about their long-term impact on household well-being. 

“There is a pressing policy need to understand the impact of reverse mortgages on longer term outcomes,” said Moulton, the principal investigator on the project. “The demand for the product has witnessed tremendous growth, with more than 500,000 reverse mortgages issued between 2006 and 2010. Further, with 10,000 Americans turning 62 each day, it is likely that more baby boomers will turn to reverse mortgages to convert equity in their homes into cash.”

Moulton cautions that the growth in demand for reverse mortgages is coupled with increasing concern about the potential vulnerability of seniors, particularly those facing retirement with significant financial shortfalls. “This environment creates opportunities for predatory practices and ill-informed decisions that can actually erode housing and financial stability, the opposite of the policy intent for reverse mortgages in the first place.”

Information gathered from this research will help policymakers, including the U.S. Department of Housing and Urban Development and the new Consumer Financial Protection Agency, make decisions about the appropriateness of reverse mortgages for seniors, and the necessary regulatory, underwriting and counseling procedures that may be needed.  

The project will pull together several unique datasets to provide an in-depth understanding of senior decision-making regarding reverse mortgages. “Through our partnership with CredAbility, one of the nation’s leading nonprofit reverse mortgage counseling organizations, we will be able to link longitudinal client level data on more than 30,000 seniors who considered reverse mortgages with individual level data from the National Council on Aging and loan level data from the U.S. Department of Housing and Urban Development,” Moulton said. “Further, we will administer a follow-up survey to a sample of seniors to better understand the impact of reverse mortgages on longer term well-being.”

“We are excited to work with Stephanie Moulton and other researchers on this project,” said Mark Cole, executive vice president and chief operating officer for CredAbility. “Each day, we see the consequences of people aging with debt and the stress of facing an uncertain financial future. We are honored to be part of a groundbreaking project to establish research and outcomes that will help seniors enjoy secure and independent living.”

Selected through a competitive process from a pool of 212 proposals, the projects were awarded as part of the MacArthur Foundation's $25 million research initiative on How Housing Matters to Families and Communities. The initiative is exploring if and how quality, stable, affordable housing promotes positive outcomes in education, employment, and physical health, among other areas. It is specifically seeking to determine how investments in housing may help realize a greater return from other social and public investments. The five grants given out totaled $2.7 million.

“In the context of tough economic times and a challenging housing market, these forward-thinking researchers will seek solid evidence to help policymakers, community leaders and citizens identify smart, cost-effective ways to connect housing, health, community development, and education policy to address the needs of families and communities,” said Ianna Kachoris, housing program officer for the foundation.

Other How Housing Matters grant recipients are:

University of Michigan -- $886,000 to study whether service and support interventions provided in a retirement community improve outcomes for moderate and low-income seniors as much as those for seniors of greater means.

LeadingAge Center for Applied Research -- $698,000 to study the impact of service-enriched, publicly assisted housing on health, quality of life and costs for older adults.

Syracuse University -- $500,000 to study how housing affordability affects decisions made by older adults about their health care, living arrangements and well-being.

New York University -- $202,000 to study if and how housing subsidies improve educational outcomes for children of low-income families.

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