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Homeowners want sophisticated loan products, survey says

Feb 26, 2007

Ginnie Mae mortgage backed security may lower cost of HECMsMortgagePress.comGinnie Mae HECM MBS Ginnie Mae is creating a Home Equity Conversion Mortgage (HECM) mortgage backed security (MBS). The HECM MBS will allow approved issuers to securitize and sell their Federal Housing Administration (FHA) insured HECM loans in the form of a Ginnie Mae MBS. 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 our existing mission to expand access to affordable housing opportunities in America," said Robert M. Couch, president of Ginnie Mae. "Home values have grown significantly over the years, and reverse mortgages are a good way for many seniors to stay in their homes, maintain ownership and access an additional stream of income to enhance their retirement." 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 HECM MBS will increase liquidity by providing capital market funding sources to primary market HECM lenders, broadening distribution channels for HECM loans and expanding the investor base for the HECM product. 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 clearly a key growth area for FHA. 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 Federal Housing Commissioner Brian D. Montgomery. "Ginnie Mae's securitization of HECMs will help us keep pace." Under the Ginnie Mae structure, approved issuers will have the flexibility to pool HECM loan draws and securitize the balance through a Ginnie Mae security. The HECM MBS will be a new class of Ginnie Mae security under the umbrella of the Ginnie Mae II custom program. The HECM MBS will be an accrual class, pass through security. Accordingly, the HECM MBS will not have a payment schedule. Rather, it will accrue interest on the securitized principal until such time as payoffs are received. The HECM MBS can be sold to investors as a stand alone security or be used as collateral for a Ginnie Mae Real Estate Mortgage Investment Conduit. For more information, visit
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Feb 26, 2007
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