Reverse Mortgages and Linked Securities: The Complete Guide to Risk, Pricing, and Regulation

Preface

Over the past few years, seniors and soon-to-be retirees (Baby Boomers) have lost tremendous value in their retirement plans and especially in their home values. In addition to the depreciation of assets held by this group of Americans, unprecedented amounts of leverage used to finance their daily living, automobile purchases, and children’s educations, as well as to purchase primary and even secondary residences in many cases, have left a large number of older Americans on the brink of financial ruin.

The Baby Boomers (born between 1946 and 1960) currently comprise 26 percent of the population of the United States or roughly 78 million people. Encompassing two cohorts (people born between 1946 and 1955 make up the first cohort and the second cohort, aka “Generation Jones,” is made up of people born from 1956 to 1964), the Boomer generation is one of the largest and wealthiest demographics in U.S. history. According to a study conducted by McKinsey & Company, the wealth of the Baby Boomers can be attributed to three major factors:

1. Size

2. Social change

3. Education

Clearly, the sheer size of the Baby Boomers cohort allowed them to generate more income on a collective basis, being that this generation is some 50 percent larger than the previous generation. Baby Boomers have earned an estimated $2 trillion more (roughly $3.7 trillion) than the previous generation had at the same age. Moreover, the Baby Boomers were the first generation to experience a much higher number ...