Atare E. Agbamu continues his HECM at 20 Series of interviews with Craig Corn, the VP of MetLife’s reverse mortgage division by discussing his role in the development of the secondary market for reverse mortgages.
Starting with Lehman Brothers in 1998, the company engineered the first reverse mortgage securitization and later lead to the acquisition of Financial Freedom by Lehman Brothers.
Corn discusses the challenges in developing a way to securitize a new new asset class and how things have changed since the development of Ginnie Mae’s HMBS program.
From investors and rating agencies standpoint, the significance of the 2006 HECM securitization and the 2007 Ginnie Mae HMBS stems from the elimination of crossover risk (thanks to Federal Housing Administration [FHA] insurance) and the certainty of pre-payment when loan balance approaches 98 percent of FHA’s maximum claim amount (MCA).
Because HECM products dominate reverse mortgage origination, their increased use as collateral for Ginnie Mae’s securitizations gives investors the confidence to consider reverse mortgage-backed securities as a viable asset class, knowing that securitizations will be regular.