Ginnie Mae issued the first reverse mortgage real estate mortgage investment conduit (REMIC) composed of Bank of America reverse mortgage securitizations according to an offering circular supplement obtained by DealFlow Media last week. 

The REMIC is worth $130.9 Million, and consists entirely of HECM MBS, making it the first reverse mortgage REMIC. The REMIC is guaranteed by Ginnie Mae, bearing its timely payment guarantee, and backed by “the full faith and credit of the United States of America.”

The REMIC contains two classes of assets, FA and FI, bearing initial interest rates of 1.4% and 1.786% respectively. According to Jeff Lewis, Chairman of Generation Mortgage, this is “the simplest form of restructuring that could take place in a REMIC.”

Lewis notes that there has always been a conflict in the reverse mortgage industry between the structure of the HECM product and investors.  He adds that it is very complicated to provide the original floating rate HECM to consumers. “The certainty associated with a fixed rate has combined with the fact that investors like dealing with fixed rates and not dealing with the potential of future cash flows,” says Lewis.

At the end of the day, Lewis cites the REMIC as a distribution method. Better execution in the industry will lead to better deals for reverse mortgage borrowers but the REMIC does not represent a “seed change” for the reverse mortgage industry says Lewis.

Write to Reva Minkoff