Ginnie Mae Backs Reverse Mortgages

17 October 2006
Associated Press

WASHINGTON (AP) -- Federal housing finance agency Ginnie Mae announced Tuesday it will begin securitizing reverse mortgages, which allow older homeowners to convert equity in their homes to monthly streams of income or lines of credit.

Ginnie Mae, which offers mortgage-backed securities guaranteed by the federal government, sees a growing market for reverse loans as the U.S. population continues to age. The wholly owned government corporation says the number of reverse mortgages issued in the U.S. increased by 73 percent between 2005 and 2006.

Under the agreements, homeowners over age 62 receive payments in a lump sum, a line of credit or a monthly payment. The loan becomes due only when the last borrower moves out, dies or sells the home.

According to a release by Ginnie Mae, the federally guaranteed reverse mortgages "will provide the mortgage-backed securities marketplace with a full faith and credit vehicle for the securitization" of reverse mortgages.

The Mortgage Bankers Association came out in support of the initiative, saying "as homes have increased in value and life spans have grown longer, many people are looking at their homes as a resource to help finance their later years."

The number of Americans over 65 is expected to increase from about 34 million today to 70 million by 2030, according to the Government Accountability Office.