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It is hoped the market will re-emerge at some point to support private programs, but it is not clear when.

The second argument is that the HECM program generates what economists term “positive externalities,” which are benefits to society that are not enjoyed by the private firms involved in the activity. By providing a facility for converting illiquid housing wealth into spendable funds, the program reduces the burden on public services of various types that are directed toward seniors in need.

In addition to Medicaid, these include single-purpose loan programs directed toward home repair and property taxes that are offered by many states and municipalities; and a variety of services offered through the Aging Network, such as senior centers, in-home care and nutrition support that are financed by the federal government.

The argument gains increasing force as the number of homeowners retiring without adequate income increases while their life spans also grow longer.

The third argument for HECMs is that they offer senior homeowners living primarily off investments insurance against a type of risk that is becoming increasingly important: the risk of outliving their financial assets. They insure against this risk by taking a HECM line of credit when they retire, allowing it to grow over time with market interest rates. The line is tapped in later years if it is needed, otherwise their unused equity reverts to their estate. This kind of insurance is not available in the private market.

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