Reverse Mortgage and Senior Property Tax Relief

Abstract

Home Equity Conversion Mortgage (HECM) loans experience high rates of property tax default (IFE, 2016; CFPB, 2012). Given tax burden is predictive of default (Moulton, et. al., 2015), it is important for HECM participants to take advantage of available property tax relief programs. To examine participation in property tax relief programs we match loan-level HECM origination records with local administrative tax records for properties in Chicago, IL. We find that nearly 40 percent of eligible HECM borrowers do not participate in a senior tax relief program for which they meet all eligibility requirements. Further, we find that senior tax relief participation is associated with a reduced probability of property tax default of 60 percent.