@article {https://doi.org/10.1002/aepp.13219, title = {Food insecurity among older adults in the U.S.: The role of mortgage borrowing}, journal = {Applied Economic Perspectives and Policy}, volume = {44}, year = {2022}, pages = {549-574}, abstract = {Housing wealth is the main source of wealth for many older adults. Using the Health and Retirement Study, we assess the impact of new mortgage borrowing on food insecurity among homeowners aged 65 and older. We find a substantial short-term effect, with each additional \$10,000 borrowed, lowering food insecurity by 2.2 percentage points. In a simulation of the impact of relaxing the debt-to-income borrowing constraint, food insecurity is reduced by 2.1 percentage points for previous nonborrowers and by 1.6 percentage points for borrowers. Results support the importance of access to mortgage borrowing to reduce material hardship in older age.}, keywords = {Food insecurity, Housing wealth, mortgage borrowing}, doi = {https://doi.org/10.1002/aepp.13219}, author = {C{\"a}zilia Loibl and Rhodes, Alec P. and Stephanie Moulton and Donald Haurin and Edmunds, Chrisse} } @article {HAURIN2022100362, title = {The relationship of financial stress with the timing of the initial claim of U.S. Social Security retirement income}, journal = {The Journal of the Economics of Ageing}, volume = {21}, year = {2022}, pages = {100362}, abstract = {A large number of U.S. adults claim Social Security benefits at age 62, substantially earlier than the government specified full retirement age. One implication of an early claim is a reduction in the amount of future monthly benefits. The literature on the timing of Social Security claiming has developed numerous hypotheses to explain this behavior; however, previous empirical work has found few factors are statistically significant explanators of early benefit claims. We propose a new test concerning why some older adults claim Social Security benefits early; specifically, we test whether the level of an individual{\textquoteright}s financial stress prior to the claiming decision is associated with a benefit claim at age 62. Our analysis finds that the greater the level of financial stress prior to claiming, the less likely is claiming, controlling for many aspects of an individual{\textquoteright}s financial, social, and demographic situation. Comparing two individuals, we find that a person with a relatively high level of financial stress is 4 to 7 percentage points more likely to delay claiming Social Security benefits than a person with a low level of financial stress. We also find that earned income moderates the relationship between an individual{\textquoteright}s financial stress and early claiming, where the same increase in financial stress is more likely to result in a delay in claiming for those with higher earnings than those with lower earnings.}, keywords = {Early retirement, financial stress, Social security income}, issn = {2212-828X}, doi = {https://doi.org/10.1016/j.jeoa.2021.100362}, author = {Donald Haurin and Stephanie Moulton and C{\"a}zilia Loibl} } @conference {11807, title = {Economic Security in Retirement: Does Borrowing from Home Equity Moderate the Impact of a Health Shock on Health Outcomes?}, booktitle = {Retirement and Disability Research Consortium 23rd Annual Meeting}, year = {2021}, month = {08/2021}, publisher = {Center for Financial Security, University of Wisconsin-Madison}, organization = {Center for Financial Security, University of Wisconsin-Madison}, address = {Virtual Event}, abstract = {Health shocks pose a significant risk to economic security in retirement. About 35 percent of older adults are diagnosed with a major disease by age 65, rising to 65 percent by age 90 (Poterba et al. 2018). These health shocks are costly. While the majority of older adults receive Medicare, nearly 20 percent of health expenditures are paid out of pocket (DeNardi et al. 2016). Older adults often self-insure against these risks by accumulating wealth, including home equity. In this study, we ask: To what extent does home equity mitigate the economic burden created by a health shock, ultimately leading to better health outcomes? In contrast to a life cycle model, older adults tend to only spend down home equity following an expense shock (Davidoff, 2010; Nakajima \& Telyukova, 2019; Poterba \& Venti, 2017a). Several recent studies document a decline in home equity after a health shock (Gilligan et al. 2018; Gupta et al. 2018; Poterba et al. 2018), with home equity being second only to formal health insurance for financing health related consumption after a health shock in older age (Dalton and LaFave 2017). These studies do not identify the extent to which liquidating home equity improves the older household{\textquoteright}s health following a shock. An existing body of literature estimates the causal relationship between housing wealth and health outcomes generally, not limited to individuals with a health shock (Angrisani and Lee 2016; Costa-Font et al. 2019; Fichera \& Gathergood 2016; Hamoudi and Dowd 2013; 2014). Similar to our approach, these studies rely on geographic and intertemporal variations in house prices to isolate the exogenous component of housing wealth, either through reduced form specifications that directly model the relationship between changes in house values or house prices on health outcomes (Angrisani and Lee 2016; Fichera \& Gathergood 2016; Hamoudi and Dowd 2013; 2014) or by using geographic changes in house prices as an instrument for housing wealth (Costa-Font et al. 2019). While these papers tend to find a positive relationship between increases in housing wealth and health outcomes, they do not model the mechanisms through which this occurs{\textemdash}which is critical to inform policy. We expect that it is not simply the stock of home equity held by older adults that leads to better health outcomes, but the liquidation of home equity through borrowing following a health shock that leads to improved health outcomes. }, keywords = {health shock, Home equity, Retirement}, url = {https://cfsrdrc.wisc.edu/files/2021-RDRC-Meeting-Booklet.pdf$\#$page=7}, author = {Stephanie Moulton and Joseph, Joshua and C{\"a}zilia Loibl and Donald Haurin} } @article {11209, title = {The role of consumer and mortgage debt for financial stress.}, journal = {Aging \& Mental Health}, year = {2020}, abstract = {

OBJECTIVES: Financial debt held by older adults in the U.S. has grown over the past two decades. This study examines the extent to which credit cards, other consumer debts, and mortgage debt increase financial stress. Outcome measures of financial stress include the material domain ("bill-paying difficulty") and psychological domain ("ongoing financial strain").

METHOD: We analyzed adults age 62 and older in the 2004 to 2016 waves of the Health and Retirement Study using random-effects logit regressions.

RESULTS: Unsecured consumer debt is associated with more financial stress per dollar than mortgage debt. A detailed assessment of mortgage debt finds that greater levels of both first and secondary mortgages are associated with greater bill-paying difficulty and greater ongoing financial strain. An increase in new mortgage debt obtained after age 62 is associated with an increase in bill-paying difficulty, but is not significantly associated with ongoing financial strain. In contrast, a reduction in mortgage debt since age 62 is associated with lower bill-paying difficulty and lower levels of ongoing financial strain.

CONCLUSION: The relationship between consumer debt, mortgages, and financial stress is nuanced, and depends on both the type and timing of the debt.

}, keywords = {financial stress, mortgage borrowing, Quality of Life, Well-being}, issn = {1364-6915}, doi = {10.1080/13607863.2020.1843000}, author = {C{\"a}zilia Loibl and Stephanie Moulton and Donald Haurin and Edmunds, Chrisse} } @article {10530, title = {Debt Stress and Mortgage Borrowing in Older Age: Implications for Economic Security in Retirement}, number = {WI19-06}, year = {2019}, institution = {Retirement and Disability Research Center- University of Wisconsin-Madison}, abstract = {The amount of financial debt held by seniors in the U.S. has grown substantially over the past decade. Prior research links higher levels of debt to increased psychological stress and decreased physical health. For seniors, these effects may be exacerbated by fixed incomes and limited ability to offset higher monthly debt obligations through increased labor supply. This study will quantify stress associated with different forms of debt held by seniors{\textemdash}including reverse mortgages, a type of debt available only to seniors; and will explore the relationships between different types and timing of mortgage debt and older adults{\textquoteright} decisions regarding labor force participation and claiming of Social Security Benefits. To analyze these relationships, we use panel data from six waves of the Health and Retirement Study (HRS), supplemented with our own survey data on more than 1,000 reverse mortgage borrowers. Reverse mortgage borrowers are underrepresented in traditional survey populations and thus have been understudied despite potential growth in the market. This research links directly to the SSA{\textquoteright}s focal area of measuring sources of income and adequacy, and in particular consumer debt as part of a household{\textquoteright}s financial portfolio in retirement that presents an evolving risk to economic security. Debt stress among seniors can also have implications for labor force participation and the timing of draws from OASI. In addition to identifying the relationship between debt stress and retirement decisions, we examine the role of reverse mortgages for alleviating debt stress.}, keywords = {debt. mortgage, Finance, Stress}, url = {https://cfsrdrc.wisc.edu/project/wi19-06}, author = {Stephanie Moulton and Donald Haurin and C{\"a}zilia Loibl} } @article {11241, title = {Food Insecurity among Older Adults in the US: The Role of Mortgage Borrowing}, year = {2019}, institution = {Joint Center for Housing Studies of Harvard University}, abstract = {As of 2016, close to 10 million older adults faced the threat of hunger in the US, constituting an urgent food policy issue. For older adults, heterogeneity in household wealth is even more important than income in predicting whether or not a household is food insecure. Yet not all wealth is equally accessible for households experiencing food hardship. Housing wealth{\textemdash}an illiquid asset{\textemdash}is the primary source of wealth for many older adults, particularly those with lower incomes. We use data for homeowners aged 62 and older from the Health and Retirement Study to identify the mechanism that links housing wealth to food insecurity. The results document the critical role of home equity as a {\textquotedblleft}protective buffer{\textquotedblright} and point to the importance of access to mortgage borrowing to reduce material hardship late in life.}, keywords = {Food insecurity, mortgage, Mortgages}, url = {https://www.jchs.harvard.edu/research-areas/working-papers/food-insecurity-among-older-adults-us-role-mortgage-borrowing}, author = {Stephanie Moulton and C{\"a}zilia Loibl and Donald Haurin and Edmunds, Chrisse} } @article {11240, title = {The Accuracy of Senior Households{\textquoteright} Estimates of Home Values: Application to the Reverse Mortgage Decision}, journal = {Real Estate Economics}, volume = {46}, year = {2018}, note = {https://doi.org/10.1111/1540-6229.12197}, month = {2018/09/01}, pages = {655 - 697}, abstract = {Abstract Using a unique data set of more than 14,000 senior homeowners in the United States, this study compares self-assessed home values to arm{\textquoteright}s length contemporaneous appraisals. In a sample of seniors who received counseling for a reverse mortgage, the absolute value of the assessment error averages 18.9\% of appraised value and it is biased upwards by 13.4\%. When adjusted to reflect the general population of seniors, the size and bias of the average error fall to 16.1\% and 4.2\%. Both the bias and the size of the error tend to be lower for households with higher income and credit scores but it is greater for black households. In our sample period of 2009?2011, house prices were falling. The greater the rate of price reduction, the greater is the upward bias and size of the assessment error. When seniors who applied for a reverse mortgage learn that they overvalued their home, their probability of closing the loan falls.}, keywords = {Decision making, Housing, Mortgages, Reverse Mortgage Decision}, isbn = {1080-8620}, url = {https://doi.org/10.1111/1540-6229.12197}, author = {Donald Haurin and Stephanie Moulton and Wei Shi} } @article {9236, title = {Reverse Mortgage Motivations and Outcomes: Insights From Survey Data}, journal = {Cityscape}, volume = {19}, year = {2017}, pages = {73-97}, abstract = {The primary goal of this article is to inform assumptions used by researchers and policy-makers to model the demand for and takeup of reverse mortgages. Our article describes the characteristics of more than 1,700 households that sought counseling for a reverse mortgage between 2006 and 2011; of those households, 74 percent obtained a reverse mortgage. Using data collected at the time of counseling and also followup survey data collected in 2014, we summarize self-reported motivations for seeking a reverse mortgage, including reasons for not getting a reverse mortgage, if applicable. We also compare the characteristics of households that seek reverse mortgages with the general population of senior homeowners using the 2008, 2010, and 2014 waves of the Health and Retirement Study. A final goal of the article is to compare selected outcomes of reverse mortgage borrowers with outcomes in the general population of senior homeowners}, keywords = {Housing, Mortgages}, issn = {1936-007X}, url = {https://www.huduser.gov/portal/periodicals/cityscpe/vol19num1/article4.html}, author = {Stephanie Moulton and C{\"a}zilia Loibl and Donald Haurin} } @article {MOULTON201517, title = {An analysis of default risk in the Home Equity Conversion Mortgage (HECM) program}, journal = {Journal of Urban Economics}, volume = {90}, year = {2015}, pages = {17-34}, abstract = {While reverse mortgages are intended as a tool to enable financial security for older homeowners, in 2014, nearly 12 percent of reverse mortgage borrowers in the federally insured Home Equity Conversion Mortgage (HECM) program were in default on their property taxes or homeowners insurance. Unlike the traditional mortgage market, there were no risk-based underwriting guidelines for HECMs through 2014. In response to the relatively high default rate, a variety of policy responses were implemented, including establishing underwriting guidelines. However, there is a lack of data and analysis to inform such criteria. Our analysis follows 30,000 seniors counseled for reverse mortgages between 2006 and 2011. The data includes comprehensive financial and credit report attributes, not typically available in analyses of reverse mortgage borrowers. Using a bivariate probit model that accounts for selection, we estimate the likelihood of tax and insurance default. Financial characteristics that increase default risk include the percentage of funds withdrawn in the first month of the loan, a lower credit score, higher property tax to income ratio, low or no unused revolving credit, and a history of being past due on mortgage payments or having a tax lien on the property. Our estimate of the elasticity of default with respect to credit scores is similar to that for closed-end home equity loans, but higher than that for HELOCs. We simulate the effects of alternative underwriting criteria and policy changes on the probability of take-up and default. Reductions in the default rate with a minimal effect on participation can be achieved by requiring that participants with low credit scores set aside some of their HECM funds for future property tax and insurance payments, a form of escrowing.}, keywords = {Mortgage default, property taxes, Reverse mortgages, Senior housing}, issn = {0094-1190}, doi = {https://doi.org/10.1016/j.jue.2015.08.002}, url = {https://www.sciencedirect.com/science/article/pii/S0094119015000509}, author = {Stephanie Moulton and Donald Haurin and Wei Shi} }