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Opening up the Reverse Mortgage Secondary Market

5:30 pm   -   November 28th, 2006

Without much fanfare or industry spolight, Ginnie Mae announced last month that they are now issuing a GNMA Mortgage Backed Security (MBS) for the FHA version of the Reverse Mortgage loan program known as the Home Equity Conversion Mortgage or HECM. The creation of a secondary market with GNMA guaranty is vital to expanding the options for reverse mortgage borrowers.

At present, the largest origination and secondary market players in the HECM market are IndyMac Bank through their subsidiary Financial Freedom and Seattle Mortgage Company through their subsidiary Reverse Mortgage of America. With Ginnie Mae’s offer of a MBS for the HECM it provides much needed liquidity for secondary market securitizations.

Ginnie Mae securities are “the only MBS to carry the full faith and credit guaranty of the United States government, which means that even in difficult times an investment in Ginnie Mae MBS is one of the safest an investor can make.” (taken from Ginniemae.gov)

This kind of confidence is what has been needed in the secondary market for what is perceived to be a newer and higher risk loan program in the HECM. By providing better liquidity, not only for the two largest players, may encourage new participants in the secondary market. With increased competition, there is usually a benefit to the consumer in the form of better service and lower fees associated with financing.

For more informaiton on Ginnie Mae or to read the press release, visit their website here.



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