The NRMLA/RiskSpan Reverse Mortgage Market Index (RMMI) rose to 280.99 during the third quarter of 2020, an all-time high. This reflects a 1.6% increase in senior home equity, which now stands at an estimated $7.82 trillion. Growth in senior homeowner’s wealth was largely attributable to an estimated 1.6% (or $149 billion) increase in senior housing value, offset by 1.6% (or $28 billion) increase of senior-held mortgage debt.

The National Reverse Mortgage Lenders Association (NRMLA) and RiskSpan have published the Reverse Mortgage Market Index (RMMI) since the beginning of 2000. The RMMI provides a trending measure of home equity among U.S. homeowners age 62 and older.

The RMMI defines senior home equity as the difference between the aggregate value of homes owned and occupied by seniors and the aggregate mortgage balance secured by those homes. This measure enables NRMLA to help gauge the potential market size of those who may be qualified for a reverse mortgage product. The chart above illustrates the steady increase in this index since the end of the 2008 recession.

Increasing house prices drive the index’s upward trend, mitigated to some extent by a corresponding modest increase in mortgage debt held by seniors. The most recent RMMI report (reflecting data as of the end of Q3 20202) was published last week on NRMLA’s website.

Note on the Limitations of RMMI

To calculate the RMMI, an econometric tool is developed to estimate senior housing value, senior mortgage level, and senior equity using data gathered from various public resources such as American Community Survey (ACS), Federal Reserve Flow of Funds (Z.1), and FHFA housing price indexes (HPI). The RMMI is simply the senior equity level at time of measure relative to that of the base quarter in 2000.[1]  The main limitation of RMMI is non-consecutive data, such as census population. We use a smoothing approach to estimate data in between the observable periods and continue to look for ways to improve our methodology and find more robust data to improve the precision of the results. Until then, the RMMI and its relative metrics (values, mortgages, home equities) are best analyzed at a trending macro level, rather than at more granular levels, such as MSA.

[1] There was a change in RMMI methodology in Q3 2015 mainly to calibrate senior homeowner population and senior housing values observed in 2013 American Community Survey (ACS).