The November, 2008 issue of Mortgage Banking Magazine features an interview with Ginnie Mae’s new president Joseph Murin. Journalist Robert Stowe England sat down with Murin a few months after being sworn in by HUD Secretary Steve Preston and they touch on a range of topics including reverse mortgages.
During the interview, Murin discusses his thoughts on reverse mortgages and why he thinks it’s a great tool for the baby boomer generation. Below is the section of the interview covering reverse mortgages:.
Q: What are the risks posed for Ginnie Mae by FHA’s reverse mortgage program?
A: I personally am a proponent of the reverse-mortgage capabilities. I’m very happy FHA has gotten involved with the reverse-mortgage business, and I’m ecstatic that Ginnie Mae has security programs that allow the reverse mortgages to be sold into the marketplace. I like the reverse-mortgage instrument. I don’t think we’ve had a lot of traction with it to date, because I think we are still dealing with a generation that doesn’t understand it and wouldn’t think to do it even if they thought it was a good idea. I’m talking about my father’s generation.
My generation-I’m at the edge of the baby boom generation that probably looked at their home as a leveraged asset. But, more importantly, as I think [huge numbers of] baby boomers move into retirement . . . more and more folks are going to be eligible for reverse-mortgage opportunities. I think my generation and maybe the generation after us has a lot more issues to deal with. Most in my generation do not have defined benefit pension plans. Most of my generation is probably on the cusp of 401 (k) type of retirement programs. Most of my generation is facing health-care issues. They don’t have health care for life like my father’s generation. My father was with the same company for 47 years. You don’t see that anymore.
So, I think my generation is going to be using the equity in their homes to support their retirement and to support health care and to support the longevity they may have and even help support their parents’ longevity. The longer we live as a nation, the more costly it becomes. So, I think [the reverse mortgage] is an instrument that has probably come along during a time [that] we see it being a necessary tool for survival. We haven’t seen that play out. But that’s just my take.
Q: Does the reverse mortgage provide a stream of income for the homeowner?
A: It is more of an annuity-based income for the investors when we securitize them. However, we are working on a new instrument right now that will allow us to put forward the transaction pools with the reverse pools so there is a blend of cash flow and annuity [for investors]. That might have a different appeal to some investors. So it’s not just all annuity-driven instruments. There is going to be cash flow mixed with annuities. So, it’s going to be a different kind of instrument we’re going to be offering the marketplace as well.
Q: How does this work for the borrower?
A: The borrower is saying, "I want a line a credit," but there were caps. There was a $200,000 cap on this [before Oct. 1], so they could get as much as $200,000 in a line of credit, taken out over a certain period of time. In some areas, you could have a house worth $800,000 and they [still] could only take out $200,000. [Since the caps were raised, lines of credit can go up to $417,000.]
The thing that I like about the FHA program is that there is counseling involved. You meet with the homeowner to make sure they understand what they are getting into, that there is no repayment of principal and interest [until] some life event occurs – you die or sell your property, or whatever that may be. So it’s an interesting tool that the market buys, and I think it’s timely. Like I said, I think the timing of it is appropriate for this next generation.
Q: I’ve noticed there has been a lot of advertising for this product.
A: Wells Fargo [Home Mortgage, Des Moines, Iowa] is a big advertiser of the reverse-mortgage program – a big, big player in the reverse-mortgage market. They really like that product line.
Q: Ginnie Mae has become less-well-known than other players in the MBS market.
A: Ginnie Mae is not talked about very much. Historically, you [did not] hear it mentioned [as much as] Fannie or Freddie or even FHA. But fundamentally, FHA and Ginnie Mae have to work in tandem. It’s good for your readers to understand. You probably have a lot of readers in the mortgage industry who don’t even remember government lending, because they came into [the mortgage business at a time] when government lending was not in vogue.
Q: What are your thoughts on the $??? billion Treasury package?
A: I actually look at it as an investment in America’s future. The financial marketplace is so intricately entwined that it will have such a significant impact on every American. I think this investment is the right thing to do.
Q: The final law has a proposal from House Republicans to allow Treasury to set up a Ginnie Mae-kind of insurance for mortgage-backed securities not currently guaranteed. The participants would pay a premium for that.
A: [Ginnie Mae’s premium] is 6 basis points right now. If the administration wants Ginnie Mae to participate, we’re ready and able to do so.
"I’m very happy FHA has gotten involved with the reverse mortgage business, and I’m ecstatic that Ginnie Mae has security programs that allow the reverse mortgages to be sold into the marketplace."
To read a copy of the entire interview click the link below.