1st Reverse Mortgage USA, a division of Cherry Creek Mortgage Company, Inc., announced on Friday it has gained Ginnie Mae approval to issue Home Equity Conversion Mortgage-Backed Securities (HMBS).
The Lakewood, Colorado-headquartered lender can now provide traditional lending through the Government National Mortgage Association (GNMA or Ginnie Mae), Fannie Mae, Freddie Mac, and Federal Housing Administration-insured HECMs. 1st Reverse/Cherry Creek joins 22 other Ginnie Mae-approved HMBS issuers; 12 of which were active in issuing HMBS last year.
“The Ginnie Mae approval strengthens 1st Reverse Mortgage USA’s capabilities as a mortgage lender and servicer realizing pricing and product advantages,” said Dan Harder, Vice President, 1st Reverse Mortgage USA. “The approval gives us the ability to further assist banks, credit unions, mortgage brokers and mortgage bankers of all sizes.”
Approved lenders must obtain permission from to Ginnie Mae to obtain competitive pricing for loans in the secondary mortgage markets. This helps lower financing costs and creates opportunities for sustainable options for senior homeowners, says 1st Reverse Mortgage USA.
“In terms of the competition in the marketplace, the margins are probably as tight as they’ve ever been,” Harder told RMD. “A company with Ginnie Mae authorization has more options in a market like this. We think the pricing is probably something we can build other strategies around, and with the financial assessment being released soon, reportedly, the servicing asset will have a different value.”
The lender underwent a stringent application process to demonstrate that its financial, organizational, procedural, and quality control processes were qualified to participate in the program. Now, 1st Reverse is targeting the second or third quarter of 2014 for its first issuance, according to Harder. New HECM changes—along with new products some lenders are rolling out—will impact its issuance strategy, he says.
“We don’t know what the impact is yet; it certainly is a product that affords senior homeowners access to their liquidity [in a time frame] that is an advantage to what the current product is,” he says. “Because of that, it could become the new fit, if you will.”
Because it will be a new product to the secondary market, it will take some time for investors to digest and evaluate it, he says. Ultimately, reverse mortgage servicing will have a higher value in the future, he believes, because of the new underwriting guidelines.
While the changes to the HECM program and new HECM products are impacting 1st Reverse’s issuance strategy, the lender is not currently planning to offer any proprietary products on its own.
It is, however, continuing to ramp up its HECM for Purchase platform. Purchase volume currently comprises around 20-25% of the reverse side’s overall volume, says Harder, and the lender is aiming to raise it to 35-40% this year.
“If the regular HECM doesn’t have growth this year as an industry, we don’t grow,” he says. “The Purchase program will play a major role in us offsetting that loss and getting us into growth mode.”
Written by Alyssa Gerace