The Government National Mortgage Association (Ginnie Mae) has issued a home equity conversion mortgage (HECM) mortgage-backed security (HMBS). The $116 million issuance is the first-ever government-guaranteed MBS collateralized by Federal Housing Administration (FHA)-insured reverse mortgages.
"We believe that the HMBS, like the very first MBS guaranteed by Ginnie Mae in 1970, will spur secondary market growth and increase liquidity," says Thomas R. Weakland, acting executive vice president of Ginnie Mae. "This will drive down the cost of borrowing for older Americans."
The Ginnie Mae HMBS provides the MBS marketplace with the only full faith and credit vehicle and the only standardized structure for the securitization of FHA-insured HECM loans, Ginnie Mae notes. The HMBS security simplifies the current structure of reverse mortgage securitizations and maximizes value for reverse mortgage lenders and borrowers.
The HMBS will be structured as an accrual coupon pass-through bond. HMBS issuers pass through payments to investors as homeowners pay off the loan. Issuers will be able to securitize all (original and subsequent) HECM loan draws, mortgage insurance premiums, and servicing and guarantee fees.