Comments on: Who Needs Fannie Mae? Monthly GNMA Reverse Mortgage MBS Hits $1.5 Billion

By: Anonymous

Anonymous — Thu, 17 Sep 2009 17:41:00 +0000

ReverseGuy,rnrnWell said. I am very happy Ginnie Mae is out there providing liquidity but as you stated, it is not without contingent liabilities. We need Congress to exempt HECMs from the HERA mandate for Fannie Mae to reduce its mortgage portfolio.

By: James_E_Veale_CPA_MBT

James_E_Veale_CPA_MBT — Thu, 17 Sep 2009 15:41:15 +0000

Well said. I am very happy Ginnie Mae is out there providing the current liquidity it does but it is not without contingent liabilities. We need Fannie Mae and we need Congress to exempt HECMs from the HERA mandate.

By: Anonymous

Anonymous — Thu, 17 Sep 2009 13:06:00 +0000

Be careful what you wish for. Fannie Mae takes on a large amount of “back-end” risk with being an investor on HECM loans. When lenders decide that they want to become GNMA issuers, some don’t realize that they step in the shoes of Fannie Mae – and they are now the investor (source of funds).rnrnAs an issuer, you are responsible for funding any advances on the loan (for delinquent taxes, insurance, foreclosure attorney fees, etc.). You must also buy the loan out of the GNMA security at 98% of the max claim amount – regardless of whether the loan is not assignable to HUD at that time. How many lenders can afford to cut a check for several hundred thousand dollars to buy the loan out of the GNMA pool and hold it on their balance sheet – potentially for years until the loan pays off? rnrnAs a last note, the reverse mortgage program for HUD is unique whereby the investor (aka the Issuer on GNMA security) must take title to a foreclosed property. HUD insurance will cover some, but not all, of your expenses related to the sale of that loan.

By: ReverseGuy

ReverseGuy — Thu, 17 Sep 2009 11:06:22 +0000

As an issuer, you are responsible for funding any advances on the loan (for delinquent taxes, insurance, foreclosure attorney fees, etc.). You must also buy the loan out of the GNMA security at 98% of the max claim amount – regardless of whether the loan is not assignable to HUD at that time. How many lenders can afford to cut a check for several hundred thousand dollars to buy the loan out of the GNMA pool and hold it on their balance sheet – potentially for years until the loan pays off?

As a last note, the reverse mortgage program for HUD is unique whereby the investor (aka the Issuer on GNMA security) must take title to a foreclosed property. HUD insurance will cover some, but not all, of your expenses related to the sale of that loan.

By: billwest

billwest — Wed, 16 Sep 2009 17:01:30 +0000

There are probably other issues floating around. I assume that the GNMA HMBS is an accural certificate and not throwing off a monthly cash payment like a normal GNMA- this may not be attractive for some investors
Your comment about the yield spread is interesting-especially since the price of serving is already built into the hecm loan accrual

By: Admin

Admin — Wed, 16 Sep 2009 16:42:49 +0000

Bill,

Yes, your're correct, fixed the “selling” part. Thanks

By: floridareversemortgageguy

floridareversemortgageguy — Wed, 16 Sep 2009 16:20:48 +0000

The 10 year US Treasury Note yields 3.44. In a market like this a spread of 25 to 50 basis points, or a yield of 3.71 to 3.96, on a GNMA security, which is US Government Guaranteed becasue it's an Agency and not a GSE like FNMA,, attracts lots of institutional investors. There will always be an unlimited amount of GNMA pooling available. The pricing will reflect the current market but supply of money will remain huge. That's why if we can make the changes to the adjustable program that GNMA requires to be able to pool them not only would funding not be a problem but pricing, and therefore margins, would improve dramatically.

The big question is the fixed RMs are 5.56%. If GNMA HMBS are yielding 4%, where is that 1.56% going? Any lenders out there want to comment on that? Usually the pooled security would yield about .5 less than the yield of the underlying collateral to cover the lender servicing costs.

By: floridareversemortgageguy

floridareversemortgageguy — Wed, 16 Sep 2009 16:08:04 +0000

Silly question?
Why would a large bank become an investor and not a lender?