Ginnie Mae ushers fixed-rate reverse mortgage securities to secondary marketMortgagePress.comGinnie Mae, reverse mortgages, Financial Freedom, HECM, HMBS
The Government National Mortgage Association (Ginnie Mae)
announced that reverse mortgage lender Financial Freedom has
issued two fixed-rate reverse mortgage transactions and one LIBOR
transaction under Ginnie Mae's Home Equity Conversion Mortgage
(HECM) Mortgage-Backed Securities (HMBS) program. The $177 million
fixed rate issuances and the $104 million LIBOR issuance are among
the first MBS pools backed by Federal Housing Administration
(FHA)-insured fixed rate and LIBOR reverse mortgages. The three
pools pushed the Ginnie Mae HMBS program to $648 million in
"The fixed rate and LIBOR HMBS are important next steps in the
evolution of a secondary market for reverse mortgages," said
Michael J. Frenz, executive vice president of Ginnie Mae. "This
will go a long way toward adding liquidity to the market and
increasing the investor base for HECM products by providing another
alternative to investors backed by the full faith and credit of the
Creating a reverse mortgage securitization product that is
attractive to the secondary market is critical to the long-term
success of the program. The ability to achieve strong, reliable,
and sustainable execution in the secondary market ultimately lowers
costs for the consumer by expanding product access as more lenders,
attracted by the viable business opportunity, begin to offer the
products to borrowers.
"As a leading producer of HECM loans, Financial Freedom is
committed to broadening the secondary market for reverse mortgages
in order to bring the related benefits of better execution to our
senior customers," said Michelle Minier, CEO of Financial Freedom.
"The advent of the Ginnie Mae program is timely, as its full faith
and credit guarantee addresses credit concerns investors might
have. We see these two issuances as important steps toward the
development of a liquid and efficient market in Ginnie Mae
The Ginnie Mae HMBS allows issuers to securitize an individual
HECM loan into multiple HMBS transactions as lenders distribute
funds to borrowers over time. Issuers can securitize the initial
loan draw, all subsequent loan draws, the mortgage insurance
premium, servicing and guarantee fee, and receive market pricing on
the entire loan amount. Issuers only need to pass through HMBS
payments to investors as homeowners pay off the HECM loan. Before
the HMBS, reverse mortgage lenders only received a premium on the
initial loan draw and investors reimbursed the lender on subsequent
loan draws, dollar for dollar.
Deutsche Bank, a
global investment bank, sold the $102 million HMBS pool to
secondary market investors on behalf of Financial Freedom.
"Deutsche Bank is proud to help establish a new and innovative
capital markets exit for HECMs. We have a dedicated reverse
mortgage team that is one of the market leaders in this space,"
said David Fontanilla, a vice president at Deutsche Bank
responsible for trading the reverse mortgage product.
Studies show that, as baby boomers move into retirement, Social
Security benefits and pensions could be drained, increasing the
popularity of reverse mortgages. Industry data estimates there are
approximately 27 million senior homeowners holding an estimated
$4.3 trillion of home equity, but only an estimated 400,000 HECMs
have been originated.
Since Ginnie Mae launched the HMBS program, six HMBS pools have
For more information, visit www.ginniemae.gov.