Kroll Bond Rating Agency (KBRA) has published “Five Things to Know About Reverse Mortgages,” a free guide designed to explain the nuances of this product sector.
“Because of recent changes which lowered the proceeds level of FHA-Insured HECM reverse mortgages, many originators focused on HECM originations have begun to diversify into jumbo, uninsured, proprietary reverse mortgages,” said KBRA in a press statement. “This trend has been bolstered by demographic changes which have seen an increase in home equity-rich retirees whom have not amassed and/or retained enough liquid assets to age-in-place in their homes. KBRA believes that these factors will give rise, after a period of absence following the financial crisis, to an increase in both private and public securitization of jumbo proprietary reverse mortgages.”
The new guide
offers five main considerations related to the reverse mortgages, including product options, borrower credit and capacity issues, how the product fits into residential mortgage-backed securities, negative amortization and the connection between prepayments and interest rates.
“Although fundamentally linked to residential real estate risk, the analysis of reverse mortgages on a loan and securitization level requires analytical considerations that can differ significantly from forward mortgages,” KBRA added.