An Insurance Approach to Risk Analysis of Debt Home Equity Conversion Programs

The use of home equity conversion debt creates a compounding obligation against the home that makes collateral deficiency a potentially dominant risk. Using an insurance methodology, an examination of this risk and its impact upon the potential for home equity conversion is conducted. The paper includes a consideration of how deficiency risk and maximum potential benefits are affected by the interaction of household characteristics with demographic and economic factors. Copyright American Real Estate and Urban Economics Association.