This report analyzes the Home Equity Conversion Mortgage (HECM) program. Established in the late 1980s, the program provides senior homeowners aged 62 and older access to FHA-insured reverse mortgages, which enable them to access the equity in their homes to support their financial and housing needs as they age. Unlike a forward mortgage, the HECM borrower does not make payments on the loan and the loan does not become due and payable until the last remaining borrower no longer occupies the property or until the homeowner fails to comply with other requirements of the loan, such as payment of property taxes and insurance.

This report evaluates the performance of the HECM program between 2000 and 2020 – considering borrower trends, cumulative net financial gains or losses to HUD’s Federal Housing Administration (FHA) from the HECM loans endorsed, and the effect of recent policy changes. The analysis in this report uses HUD-provided HECM loan data, plus economic data from other public data sources to illuminate significant changes in the HECM program in the context of macroeconomic and market dynamics and government policy responses.

The report finds that the HECM program grew substantially over the 2000s, reaching 114,000 originations in 2009, then contracted sharply following the housing market crash in 2009, and averaged around 50,000 originations per year in the late 2010s through 2020. The program serves primarily low-income borrowers for whom the equity in their homes far outweighs their other assets, though the share of higher-income borrowers increased between 2009 and 2020. While all HECM borrowers are aged 62 or older, the age profile of borrowers has trended younger over time. For the 533,894 HECM loans that originated and terminated during the 20-year study period, the study estimates that FHA incurred a net loss of approximately $10.4 billion. The bulk of losses came from loans that originated between 2006 and 2010. Various policies helped mitigate net losses to the program and unscheduled draws but not all policies worked as intended.