Ginnie Mae uses data to create new reverse mortgage

Borrowers are more likely to be single females who terminate slowly.

May 18, 2007 A study of the timing of reverse mortgage terminations has been completed that provides the information necessary for Ginnie Mae (Government National Mortgage Association) to issue its first HECM Mortgage-Backed Security (HMBS) this year. The Ginnie Mae HMBS will allow approved issuers to securitize and sell FHA-insured reverse mortgages in the form of a Ginnie Mae security.

The study, published by the U.S. Department of Housing and Urban Development’s (HUD) Office of Policy Development and Research (PD&R), analyzed 16 years of Home Equity Conversion Mortgage (HECM) loan level data. The HECM is the Federal Housing Administration’s (FHA) reverse mortgage product.

“This groundbreaking research will enhance the development of a secondary market for HECMs; it provides keen insights regarding the timing of HECM loan terminations; and, will greatly assist secondary market participants in assessing HECM loan performance,” said Robert M. Couch, President of Ginnie Mae.

The study by Edward J. Szymanoski, (more…)

Written by charles dennis on May 19th, 2007 with no comments.
Read more articles on Banks & Lenders and News.

Reverse Home Mortgage - How they work

Reverse home mortgage is the transfer of possession of a property by the reverse home mortgagor to the reverse home mortgagee for a particular consideration. The agreement incorporates the right of the reverse home mortgagor to redeem the property by paying the principal amount received during the transfer of possession. The contract also provides for the right of the mortgagee to collect income from the property to serve as interest for the money loaned to the reverse home mortgagor.

Contemporary reverse home mortgage evolved to provide incentives to banks to forward full payment without violating any law. There are two alternative actions. First, the bank buys the property and pays for it in full. It then acts as tenant collecting payment that is higher than the original purchase price to gain profit. Second, the bank makes full payment then resells the house at a higher price to gain profit. These alternatives benefit both the buyers and banks because the buyers do not pay interest with the banks gaining profit for their part in advancing full payment. This involves trust, payment of higher price by the buyer and non-imposition of an exorbitant price by banks. (more…)

Written by charles dennis on May 19th, 2007 with no comments.
Read more articles on education and Original Content.