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Fourth Private Reverse Mortgage Securitization Pays Off Completely

Structured Asset Securities Corporation Reverse Mortgage Loan Trust Series 2006-RM1 (SASCO 2006-RM1) became the fourth securitization trust of proprietary reverse mortgage loans to pay off completely, according to a recent New View Advisors Commentary.

On February 25, 2019, the remaining bondholders received their final payments, and now all bondholders have received their full principal and interest payments. This will help add to a loop of positive reinforcement according to Michael McCully, partner at New View Advisors.

“Empirical proof that non-agency proprietary reverse mortgage securitizations are successful gives confidence to investors in the asset class, which helps improve bond execution,” McCully said in an email to RMD. “Good bond execution passes down to originators, which in turn allows for improvement in the proprietary loan offered to consumers (LTV, rate, other features, etc).”

This in turn leads to better products, which increase origination volume, which in turn increases securitization frequency. That then increases liquidity for investors, and ultimately helps to further improve bond execution, McCully shared.

The trust was first created in August 2006, and was the fourth reverse mortgage securitization in U.S. history. The first two, SASCO 1999-RM1 and SASCO 2002-RM1, both paid off successfully in 2014. The third, SASCO 2005-RM1, followed suit with a successful pay-off in mid-2016. As of now, the sole remaining transaction that remains in the SASCO reverse mortgage securitization program is SASCO 2007-RM1.

While the production of proprietary products had only been produced in a limited way at the time 2005-RM1 was paid off in 2016, the landscape since then has expanded, said New View in its commentary.

“Since [2016], production has ramped up as multiple lenders now originate proprietary reverse mortgages,” New View writes. “New securitization programs have followed, supplied by both new and seasoned proprietary reverse mortgages.”

Proprietary reverse mortgage offerings have gained new prominence in the industry over the last year, with companies finding new solutions to fill in gaps created by generally reduced Home Equity Conversion Mortgage (HECM) volume influenced by changes that went into effect on that program on October 2, 2017.

Read more at New View Advisors.