Brief Home Equity Extraction in Late Life
Higher HECM Denial Rates among Senior Black Homeowners
Linna Zhu, Amalie Zinn, Michael Neal
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Home equity is the predominant source of wealth for Black senior homeowners in late life, making up three-quarters of their net worth, on average. As the majority of older adults choose to age in place, the ability to tap home equity to buffer risks in late life becomes increasingly important. Despite the importance of access to home equity, Black homeowners are denied home equity conversion mortgages (HECMs) more frequently than white homeowners. Black HECM applicants experience higher denial rates than white applicants for all age groups, and this denial gap persists at all loan amount levels across the neighborhood income spectrum. Financial precarity associated with limited liquid wealth and postretirement income makes it challenging for Black HECM applicants to buffer the high up-front costs of HECMs. Low housing wealth and increasing debt burden in late life limits the amount of collateral value Black homeowners can tap into when they apply for HECMs. Moreover, although the HECM financial assessment introduced in 2015 is meant to protect homeowners and reduce default rates, it decreases the amount of home equity Black senior homeowners can borrow, making them less likely to apply and less likely to get approved for a HECM loan. Reducing barriers to equity extraction is critical for improving financial stability for Black homeowners in late life.

Research Areas Housing finance Race and equity
Tags Housing finance reform Federal housing programs and policies Racial and ethnic disparities Racial homeownership gap Racial inequities in economic mobility Older adults’ economic well-being
Policy Centers Housing Finance Policy Center