Fannie Mae’s decision this month to suspend acceptance of new HECM deliveries was “a foregone conclusion,” according to one industry executive, who notes that the GSE “had effectively reduced its HECM market share from 100 percent to near zero over recent months.”
In effect, “HECMs got more expensive, which generally reduced borrower proceeds,” this person explains, “but that also brought the product more in line with other investment options in order to attract additional financiers to the market.”
Indeed, FHA’s concomitant notification that it would replace its single reverse mortgage product with a new, two-product menu (HECM Saver and HECM Standard) “was simply a convenient opportunity to allow Fannie Mae to make an announcement that it was exiting the market altogether,” the person believes.
More or less confirming this, a Fannie Mae spokesperson tells RMD that, “in light of recent product changes announced by HUD, Fannie Mae is currently assessing the infrastructure changes necessary to support the new HECM program and is unable to accept new deliveries at this time.”
“We all knew, at some point, that Fannie would not be able to buy mortgages forever,” says Michael McCully, Partner, New View Advisors. “We’ve been advocating for 10 years that secondary markets need to move away from Fannie and play a bigger role for the long-term viability of the industry.”
McCully says that as Fannie is replaced as a secondary market buyer, it is hoped that there will be “enough ultimate [proprietary] demand for the product. Reverse mortgages need to take a big step forward,” he maintains, “in getting information out and publicly available so investors can learn about the product and invest capital in it.”
Written by Neil Morse