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Housing forecast changed slightly due to impact from tighter lending

National Mortgage Professional
Aug 21, 2007

HUD discloses key HECM data after 17 yearsAtare E. Agbamu, CRMSreverse mortgages, secondary market, conventional jumbo reverse mortgages Payoff data vital to secondary market for reverse mortgages The U.S. Department of Housing and Urban Development (HUD) has released critical Home Equity Conversion Mortgage (HECM) payoff data for the first time in 17 years in a recent staff study. HECM, the only reverse mortgage insured by the federal government, is the leading reverse mortgage product in the U.S. market with more than 90 percent of the market share. Industry leaders and analysts are hailing the HUD study as a breakthrough, predicting it will accelerate the growth of a secondary market for reverse mortgages and help the nascent industry realize its full potential for America and the world. "This groundbreaking research will enhance the development of a secondary market for HECMs; it provides keen insights regarding the timing of HECM loan terminations and will greatly assist secondary market participants in assessing HECM loan performance," said Robert M. Couch, president of Ginnie Mae. Investment banking firm Lehman Brothers pioneered reverse mortgage securitization in the United States in 1999, using conventional jumbo reverse mortgages originated by Financial Freedom Senior Funding Corporation, now a subsidiary of IndyMac Bank. It has done a few jumbo reverse mortgage securitizations since 1999. Bank of America led the first HECM reverse mortgage securitization in August 2006, using HECMs originated by Reverse Mortgage of America, a division of Seattle Mortgage Company. Bank of America announced recently that it was acquiring Reverse Mortgage of America for an undisclosed amount. And in October 2006, Ginnie Mae, a federal agency within HUD charged with insuring securitization pools backed by government loans, announced that it was developing an HECM mortgage-backed security to be released by the end of 2007. Analysts and industry leaders say the handful of securitizations done since 1999 have been accomplished based on "reasonable assumptions" about reverse mortgage performance and not hard data. They say the just-released HUD staff study is a gold mine for investors, Wall Street and scholars. "This type of information is vital to the emerging HECM market because it will help structure securities more effectively and it will help investors to price the HECM security efficiently, all of which will ultimately benefit senior homeowners seeking to tap into the equity in their home," explained Couch. The HUD staff study, "Home Equity Conversion Mortgage Terminations: Information to Enhance the Developing Secondary Market," was authored by Edward J. Szymanoski, James C. Enriquez and Theresa R. DiVenti. Almost 20 years ago, Szymanoski led a team of HUD financial engineers who designed the HECM. For a copy of the study, visit www.huduser.org/periodicals/cityscpe/vol9num1/ch1.html. Atare E. Agbamu, CRMS formed ThinkReverse LLC, a Twin Cities-based training/consulting firm, to help originators address demographic change via reverse mortgages. A specialist with Credo Mortgage, Atare is the first to propose reverse mortgages as risk-management tools for forward originators. Besides marketing, originating and researching reverse mortgages since 2001, Atare has authored more than 80 articles and a book on reverse mortgages. He may be reached at (612) 203-9434 or e-mail [email protected]
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