A new acronym has been added to the reverse mortgage vocabulary - HMBS. HMBS stands for HECM mortgage backed securities. These are securities that Ginnie Mae will issue starting in September 2007 to attract investors and promote liquidity and efficiency in the growing reverse mortgage market. According to Ginnie Mae:

Today, there is a limited secondary market for reverse mortgages. With very few investors, complicated security structures, and a growing market appetite, a robust secondary market is needed to facilitate the growth and affordability of reverse mortgages. A Ginnie Mae HMBS, carrying the full faith and credit of the United States Government will serve as an attractive investment to a relatively untapped investor base. The quality and liquidity of a standardized Ginnie Mae HMBS security structure will help to foster a liquid, robust secondary market, which will in turn drive down the costs of reverse mortgages for seniors….

Ginnie Mae securities are actively traded in the global capital markets. Ginnie Mae is confident that investors will invest in its HMBS and thereby provide a robust secondary market for lenders to originate HECM loans, pool them into Ginnie Mae MBS, and sell them into the global markets. This liquidity will prove to be a great benefit for the senior homeowner. Our research indicates that the Ginnie Mae securitization of HECM loans will result in a savings of 50 basis points or more for the borrower. On an average HECM loan of $118,000, this savings amounts to over $10,000 over a 10-year period, the average life of a HECM loan.

Ginnie Mae recently released a “Reference Guide” for the HMBS program. The guide is a technical document intended to acquaint potential lenders and investors with requirements and eligibility criteria for the forthcoming program. The HMBS will likely be seen as one of the key events in the development of reverse mortgages. If you haven’t heard the acronym HMBS used, you most certainly will in the months and tears ahead.

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A Few More Related Articles of Interest:

Ginnie Mae Notes Significance of HUD Study to Reverse Mortgage Market

New Ginnie Mae Mortgage-Backed Security Could Help Lower Costs of Reverse Mortgages for Older Americans

Reverse Mortgages and Subprimes - Are there Parallels?

Death of the HECM 100?

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