|
E-mail this page to a friend!
Senior Citizen Reverse Mortgages
New Ginnie Mae Security Could Lower Costs of Reverse
Mortgages for Seniors
 October 18, 2006 In a move that is expected to
expand the reverse mortgage business and provide lower rates for senior
citizens, Ginnie Mae, the government owned mortgage-funding company,
said yesterday it is creating a new security - a Home Equity Conversion
Mortgage Mortgage-Backed Security (HECM MBS) - that will allow Federal
Housing Administration (FHA) insured home equity conversion mortgage
loans in the form of a Ginnie Mae MBS.
| |
Related Stories |
|
| |
Switching Gears: Reverse Mortgages Offer Unique Way
to Retire with Extra Income
Your home has given you a lot -
with RM, it can give you even more
By Robert Valentine,
Certified Senior Advisor
September
8, 2006 - Dorothy, the main character of the movie, The Wizard of Oz,
once exclaimed, Theres no place like home! Even in a world much
different than the one that existed when The Wizard of Oz was filmed,
that old adage still holds true.
Read more...
Reverse Mortgage Program May Get New Enhancements
House bill would
allow seniors to access greater equity amount
April 30, 2006 The Reverse Mortgage Program,
already popular with senior citizens, may get even better. The U.S.
House of Representatives is considering legislation that would make
substantial improvements to the federal reverse mortgage program,
including a plan that would allow older homeowners to access greater
amounts of equity from their homes, according to the National Reverse
Mortgage Lenders Association.
Read
more...
Read more
on
Reverse Mortgages |
|
The Ginnie Mae guaranty allows mortgage lenders to
obtain a better price for their mortgage loans in the secondary market.
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.
Reverse mortgages allow homeowners aged 62 and over
to convert home equity into cash while living at home for as long as
they wish. Borrowers continue to own their homes, and do not need to
make any monthly payments. Instead, they can choose to receive the funds
as a lump sum, line of credit, or monthly payment. The loan comes due
only when the last borrower moves out, dies, or sells the home.
According to a 2006 Government Accountability
Office (GAO) report, today's older Americans are expected to comprise a
larger share of the population, live longer, and spend more years in
retirement than previous generations. Americans 65 and older now total
about 34 million people. This number is expected to reach 70 million by
the year 2030.
The Center for Retirement Research has found that
43 percent of working households were in danger of having too little
income to fund their retirement needs. Historically, retirees have not
viewed primary residence equity as a source of consumable wealth, except
in the case of financial emergencies. Reverse mortgages are expected to
become more attractive.
The creation of a secondary market by Ginnie Mae is
considered a vital enhancement to HECM lending and will provide the
platform for lenders to repackage their capital into new loans and
attract new lenders.
"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 (REMIC).
Editor's Note: Ginnie Mae is a wholly owned
government corporation within the U.S. Department of Housing and Urban
Development. Ginnie Mae pioneered the mortgage-backed security (MBS),
issuing the very first security in 1970. An MBS enables a mortgage
lender to aggregate and sell mortgage loans as a security to investors.
Ginnie Mae securities carry the full faith and credit guaranty of the
United States government, which means, says Ginnie Mae, that even in
difficult times, an investment in Ginnie Mae is one of the safest an
investor can make.
Click to More Senior News on the
Front Page
Copyright: SeniorJournal.com |
