Risky Form of Reverse
Mortgage Nipped in the Bud by HUD
The FHA announced that it will no longer insure fixed-rate, line of credit reverse mortgages due to interest rate risk to lenders. This variation of the product commits lenders to funding additional draws at a fixed rate even if their own borrowing costs rise and ultimately threatens the FHA's insurance fund if lenders are unable to honor their commitment, according to a June 18 letter to originators. The product also raised concerns soon after its debut because many Home Equity Conversion Mortgage borrowers mistakenly assume that a fixed-rate reverse product is the better and more conservative option for them. Ginnie Mae banned fixed-rate, line of credit reverse mortgages from its securitizations this year due to similar concerns. Lenders started making the loans in October, and most stopped after the Ginnie Mae policy change.
From "Risky Form of Reverse Mortgage Nipped in the Bud by HUD"
American Banker (06/24/14) Sinnock, Bonnie
The FHA announced that it will no longer insure fixed-rate, line of credit reverse mortgages due to interest rate risk to lenders. This variation of the product commits lenders to funding additional draws at a fixed rate even if their own borrowing costs rise and ultimately threatens the FHA's insurance fund if lenders are unable to honor their commitment, according to a June 18 letter to originators. The product also raised concerns soon after its debut because many Home Equity Conversion Mortgage borrowers mistakenly assume that a fixed-rate reverse product is the better and more conservative option for them. Ginnie Mae banned fixed-rate, line of credit reverse mortgages from its securitizations this year due to similar concerns. Lenders started making the loans in October, and most stopped after the Ginnie Mae policy change.
From "Risky Form of Reverse Mortgage Nipped in the Bud by HUD"
American Banker (06/24/14) Sinnock, Bonnie
No comments:
Post a Comment