1 A non-profit service and advocacy organization © 2012 National Council on Aging Home Equity as a Financial Resource for Aging in Community Barbara Stucki, Ph.D. Vice President, Home Equity Initiatives The Long-Term Care Discussion Group June 14, 2012

2 A non-profit service and advocacy organization © 2012 National Council on Aging NCOA - National Council on Aging NCOA is a nonprofit service and advocacy organization. Our mission is to improve the lives of millions of older adults, especially those who are vulnerable and disadvantaged.

3 A non-profit service and advocacy organization © 2012 National Council on Aging Home Equity Advisor Website

4 A non-profit service and advocacy organization © 2012 National Council on Aging Market Trends and Risks

5 A non-profit service and advocacy organization © 2012 National Council on Aging Home Equity as a Resource Percent of income Value of owner-occupied real estate Personal savings Median inflation adjusted value in thousands

6 A non-profit service and advocacy organization © 2012 National Council on Aging Increasing Homeowner Vulnerability  Limited financial buffer - 40% of homeowners 65+ have incomes under 200% FPL.  Increasing housing debt - 35% of homeowners age 65+ had a mortgage in 2009 versus 24% in 1999 and 18% in Median remaining years on mortgage= 14. Median outstanding principal =$55,911 (35% of value).  Mortgage scams target older homeowners – 45% of callers to the Homeowner’s HOPE™ Hotline who report being victim of a mortgage scam are age 51 and older.  Will home equity be available to pay for LTSS if it is used earlier in retirement to manage debt or increase income?

7 A non-profit service and advocacy organization © 2012 National Council on Aging Reverse Mortgage Market Decline Endorsed HUD HECM Loans

8 A non-profit service and advocacy organization © 2012 National Council on Aging Risks in the Senior Marketplace Major banks have left the reverse mortgage market. – Wells Fargo, Bank of America, MetLife exited. – HECM foreclosures (40,000+) represent reputational risk to lenders. Declining LTC insurance market. – Carriers exiting, – Rising premiums on new policies. – Rate increases on existing blocks of business. Suspension of CLASS. Can public-private solutions help to mitigate risks to both industry and government?

9 A non-profit service and advocacy organization © 2012 National Council on Aging Emerging Needs and Strategies Data from Reverse Mortgage Counseling Clients

10 A non-profit service and advocacy organization © 2012 National Council on Aging Reasons for Tapping Home Equity - HECM Reason for Considering a RM FIT Review 2010 AARP Survey 2006 Enhance quality of life 27% 70% Plan ahead for emergencies 23% 73% Pay off debt 67% NA Pay off mortgage NA 34% Pay off non-mortgage debt NA 27% Increase income 33% 46%

11 A non-profit service and advocacy organization © 2012 National Council on Aging Attributes of HECM Counseling Clients Source: NCOA analysis of 21,242 FIT reviews from HECM counseling conducted from 9/15/10 to 11/10/10.

12 A non-profit service and advocacy organization © 2012 National Council on Aging Health Status of Counseling Clients, by Age Percent

13 A non-profit service and advocacy organization © 2012 National Council on Aging Income by Age Among Counseling Clients

14 A non-profit service and advocacy organization © 2012 National Council on Aging Net Home Equity by Income

15 A non-profit service and advocacy organization © 2012 National Council on Aging Using Home Equity to Support Aging in Community

16 A non-profit service and advocacy organization © 2012 National Council on Aging Variations in Homeowner Resources

17 A non-profit service and advocacy organization © 2012 National Council on Aging Potential Public-Private Partnerships Cash and Counseling approach. – Use home equity to help older homeowners who do not quality for public programs or who face large co-pays. – Counseling and/or fiscal oversight to ensure funds are use wisely and to avoid financial fraud. Medicaid as a “reverse mortgage” program for middle income seniors. – Already pay for HCBS and then recover expenditures from the beneficiary’s estate (home). – Encourage upfront use of home equity to support aging in community and increase choice and control. – Ensure financial eligibility standards to allow homeownership. Link to HECM Saver reverse mortgages. Encourage the development of low-cost equity release products.

18 A non-profit service and advocacy organization © 2012 National Council on Aging Factors Affecting Loan Suitability  Duration of stay in home – Long versus short?  Short stay – Loan type, upfront loan costs.  Moderate stay – Transition out of home, remaining equity.  Long stay – Sustainability, interest rates.  Funds needed – Small versus substantial?  How long may funds last? Can they meet their goals?  Impact of upfront lump sums on remaining equity.  Ability to stay home – Likely versus unlikely?  Recent health changes, isolation, home environment.  Availability and cost of additional help.  Dependence on loan – High or low?  Payment options – Monthly payments versus credit line?  Other supports – Family, community, public programs.

19 A non-profit service and advocacy organization © 2012 National Council on Aging Impact of Decisions on Remaining Home Equity Amount of Remaining Equity $600 per monthly draw For illustrative purposes only $2,000 per month

20 A non-profit service and advocacy organization © 2012 National Council on Aging Many Unanswered Questions Will traditional models based on gradual asset accumulation and decumulation work in our uncertain economic times? When and how should homeowners tap home equity? What are the best strategies to assist financially vulnerable older homeowners? What opportunities exist to foster public-private partnerships to support the effective use of home equity in later life? How can the financial services industry and agencies that serve seniors work together to meet these new challenges?

21 A non-profit service and advocacy organization © 2012 National Council on Aging Barbara R. Stucki, Ph.D. Vice President, Home Equity Initiatives National Council on Aging