Fannie Mae announced it’s no longer purchasing reverse mortgages due to its internal systems lack of ability to handle the new HECM Standard and Saver products according to a letter obtained by RMD.
The Government Sponsored Entity (GSE) is no longer accepting new commitments or deliveries that have case numbers dated on or after October 4, 2010. Lenders have a 90 day period in which they can deliver any loans that were obtained prior to the start of the Department of Housing and Urban Developments FY 2011.
While the changes might sound drastic, the reality is that Fannie Mae’s importance in the reverse mortgage business has been sliding dramatically ever since it announced significant pricing changes in 2009. The GSE’s market share went from 68% in the second quarter of 2009 to approximately 2% during the second quarter of 2010. Fannie Mae purchased $200 million of HECMs during the last quarter and its portfolio has leveled off for the most part at $50.7 billion.
The marketplace found a better alternative in Ginnie Mae’s HMBS program which is the main source of liquidity for reverse mortgage lenders. According to data from the agency, HMBS issuance rose from $1.357 billion in 2008 to $8.538 billion in 2009. For 2010, HMBS reached $7.244 billion as of August and will easily pass the record levels of 2009.
There was concern about whether the announcement would impact smaller Ginnie Mae issuers, who don’t have the ability to issue adjustable rate HMBS because of the liquidity requirements, but it’s not the case. An executive at a leading wholesale lender told RMD that those without the authority should have agreements to sell to someone who does, so its unlikely that it will be an issue.
The industry continues to wait for Ginnie Mae to start accepting new HMBS issuers after it suspended approvals to perform a “comprehensive review of the risks associated with the HMBS (HECM MBS) program both to issuers and Ginnie Mae, in order to evaluate possible changes to the program.” The agency has refused to release any details on what the new net-worth requirements will be or when they will be announced.
Until they do, the reverse mortgage industry has only nine active issuers.