Magazine article American Banker

Fannie Preparing Strict Standards for Reverse Loans

Magazine article American Banker

Fannie Preparing Strict Standards for Reverse Loans

Article excerpt

Fannie Mae is setting tough standards for the scores of lenders that will begin using its reverse mortgage program this month.

"We're asking for a lot more dedicated resources both on the origination and servicing side," said Robert J. Sahadi, vice president for housing initiatives at Fannie, formally the Federal National Mortgage Association.

The edict comes two months after Fannie Mae said it would mount the industry's first widespread push into reverse mortgages. The products allow senior citizens to tap the equity in their homes by receiving regular payments or a line of credit that is payable when the home is sold.

To encourage lenders, Fannie Mae ultimately plans to pool the loans for sale in the secondary market. Initially, though, Fannie will hold the loans in its portfolio to build volume.

Business will not be hard to come by if initial interest is any indication. Since November, more than 80,000 consumers have jammed public information lines at Fannie Mae, seeking information about the products. Fannie has also received inquiries from more than 200 lenders that want to offer the products, Mr. Sahadi said.

Lenders will have to send their loan officers to classes that Fannie will sponsor on the mechanics of making and servicing reverse mortgages.

Fannie has begun the classes in each of its five regions. The agency expects to have a few hundred loan officers trained by the end of January, Mr. Sahadi said.

As part of loan servicing, Fannie Mae is telling lenders to pay ongoing attention to the property. The agency wants regular inspections "to make sure the roof isn't leaking and shingles aren't falling off," Mr. …

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