Moral Hazard in Home Equity Conversion
- Topics:
- Real Estate Portfolio Management
- Tags:
- Business Operations,
- Real Estate,
- Mortgages,
- Investment,
- Hazard,
- Financial Services,
- Finance,
- Equity,
- Capital Structures,
- Real Estate Economics
- Source:
- Real Estate Economics
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Overview: Home equity conversion as presently constituted or proposed usually does not deal well with the problem of moral hazard. Once homeowners know that the risk of poor market performance of their performance of their homes is borne by the investors, they have an incentive to neglect to take steps to maintain the home values. A caliber model for asserting this moral hazard risk is presented that is suitable for a number of home equity conversions form: reverse mortgages, home equity insurance, shared equity mortgages, sales of remainder interest. Modifications of these forms involving real estate price indexes are proposed that might deal better with the problem of moral hazard.
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Format: PDF | Size: 2,344KB | Date: Jan 2003 | Pages: 31
