Magazine article Mortgage Banking

Ginnie Mae to Securitize Reverse Mortgages

Magazine article Mortgage Banking

Ginnie Mae to Securitize Reverse Mortgages

Article excerpt

Seeking to offer a new mortgage product while catering to the growing demographic of aging homeowners, the Government National Mortgage Association (Ginnie Mae) announced it will begin securitizing reverse mortgages.

Ginnie Mae's Home Equity Conversion Mortgage Mortgage-Backed Security (HECM MBS) will allow approved issuers to securitize and sell their Federal Housing Administration-insured (FHA-insured) home-equity conversion mortgage loans in the form of a Ginnie Mae MBS.

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HECMs are commonly referred to as reverse mortgages, and are designed to allow older homeowners to convert the equity in their homes to monthly streams of income or lines of credit.

The Ginnie Mae HECM MBS is an extension of the federal housing finance agency's existing mission to expand access to affordable housing opportunities in America, Ginnie Mae President Robert M. Couch told attendees at MBA's 93rd Annual Convention & Expo in Chicago in October.

"We believe that having a HECM security out there will increase liquidity, broaden originations and distribution channels, and expand existing HECM investor bases," said Couch. "That means we'll decrease the cost of the product and increase its accessibility and use."

Couch noted that the Ginnie Mae HECM MBS will provide the mortgage-backed securities marketplace with a full faith and credit vehicle for the securitization of HECMs.

The increased competition among lenders should result in expanded product offerings and reduced costs to borrowers. The Ginnie Mae guaranty allows mortgage lenders to obtain better pricing for their mortgage loans in the secondary market.

The HECM program is expected to be a key growth area for FHA, according to Federal Housing Commissioner Brian D. Montgomery.

"We're working hard to ensure that we keep pace with the needs of our low- to moderate-income borrowers, making programmatic changes to keep up with the times," said Montgomery. …

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