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
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
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
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]