The secondary market for reverse mortgages is welcoming the expansion of adjustable rate securitizations through Ginnie Mae’s HMBS (HECM MBS) program. Leading the way for its sheer size is Bank of America – producing $200 million to $300 million a month in fixed and adjustable HMBS.
The reverse mortgage division at Bank of America released its fixed-rate product on August 24 of this year. Until then, all originations were adjustable-rate products.
The adjustable-rate HECM has drawn different borrower types with different utilization patterns, which promises greater expansion of secondary market support for the product. Yet other organizations are reluctant to retain that risk, because in funding balances at par they may not have the balance sheet or capacity to take on commitments for a large number of loans (not knowing how the market will change or what draws will be worth to the secondary market in the future).
The “big story” in secondary marketing for HECMs is Fannie Mae – they were the market for most of 2007, 2008 and early 2009.
But, now, other investors are re-engaging in that market as FM reduced their prices to competitive levels and stopped supporting it. That investor base diversity is good for the industry; it will grow as people understand the product and its performance is documented.