NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Moral Hazard in Home Equity Conversion

Robert J. Shiller, Allan N. Weiss

NBER Working Paper No. 6552
Issued in May 1998
NBER Program(s):   AP

Home equity conversion as presently constituted or proposed usually does not deal well with the potential problem of moral hazard. Once home-owners know that the risk of poor market performance of their homes is borne by investors, they have an incentive to neglect to take steps to maintain the homes' values. They may thus create serious future losses for the investors. A calibrated model for assessing this moral hazard risk is presented that is suitable for a number of home equity conversion forms: 1) reverse mortgages, 2) home equity insurance, 3) shared appreciation mortgages, 4) housing partnerships, 5) shared equity mortgages and 6) sale of remainder interest. Modifications of these forms involving real estate price indices are proposed that might deal better with the problem of moral hazard.

download in pdf format
   (964 K)

email paper

This paper is available as PDF (964 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w6552

Published: Shiller, Robert J. and Alan N. Weiss. "Moral Hazard In Home Equity Conversion," Real Estate Economics, 2000, v28(1,Spring), 1-31. citation courtesy of

Users who downloaded this paper also downloaded these:
Mitchell and Piggott w10340 Unlocking Housing Equity in Japan
Venti and Wise w3547 Aging and the Income Value of Housing Wealth
Gaynor, Haas-Wilson, and Vogt w6865 Are Invisible Hands Good Hands? Moral Hazard, Competition, and the Second Best in Health Care Markets
Case and Shiller w2506 The Efficiency of the Market for Single-Family Homes
Shiller w7008 Measuring Bubble Expectations and Investor Confidence
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us