Reverse Mortgage Pools Keep AAA Rating says Fitch

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The Ratings Outlook of HECM Trusts backed by reverse mortgage loans continue to hold their AAA rating said a statement from Fitch Ratings.  The classes confirmed consist of a pool of reverse mortgages mortgages (HECM) insured by the Federal Housing Administration and their ratings outlook remains stable.

During the review Fitch compared the actual pay-down performance of the classes to its own cash flow projections and found that there have been no trigger events.

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“Taken as a whole, reverse mortgage securitizations are definitely performing better than most other non-agency residential mortgage securitizations of the same vintage,” said Joe Kelly, Partner at New View Advisors, a capital markets and investment bank specializing in the reverse mortgage sector. “The bonds secured by reverse mortgage securitizations have not experienced the downgrades and write-downs so widespread in other sectors of the securitization market.”

However, Kelly said that with any HECM investment vehicle, the issue of taxes and insurance defaults affect the deals. “Some of the HECM loans in these securitizations have defaulted and some of these trusts now own REO properties. Of course, the role of the servicer is very important here, so it is significant that Fitch recently upgraded Financial Freedom’s servicer rating.”

Even with the T&I issues, Kelly added, “generally speaking the reverse mortgage securitization sector is performing well under difficult economic conditions, and Fitch’s recent ratings affirmations attest to that.”

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