Ginnie Mae announced today that Financial Freedom, a leading reverse mortgage lender, issued two fixed-rate reverse mortgage deals and one Libor transaction under the agency's Home Equity Conversion Mortgage (HECM) Mortgage-Backed Securities (HMBS) program.
The $177 million fixed-rate offerings and the $104 million Libor transaction are among the first MBS pools backed by Federal Housing Administration-insured fixed-rate and Libor reverse mortgages. The three pools catapulted the Ginnie Mae HMBS program to $648 million in issuance.
The fixed rate and LIBOR HMBS are important next steps in the evolution of a secondary market for reverse mortgages, said Michael Frenz, executive vice president at the agency. 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 U.S. Government.
The Ginnie Mae HMBS is a program that allows issuers to securitize an individual HECM loan into multiple HMBS deals as lenders distribute funds to borrowers over time. Issuers can also 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.
According to a release from Ginnie Mae, 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 MBS investors paid back the lender on subsequent loan draws, dollar for dollar.
Deutsche Bank sold the $102 million HMBS pool to secondary market investors on behalf of Financial Freedom. The release also noted that reverse mortgage securitization program has exceeded the $600 million issuance mark.
The agency's release said that since Ginnie Mae launched the HMBS program, six HMBS pools have been issued.