Washington, DC - Ginnie Mae today announced it is creating a Home Equity Conversion Mortgage Mortgage-Backed Security (HECM MBS). The HECM MBS will allow approved issuers to securitize and sell their Federal Housing Administration (FHA) insured home equity conversion mortgage loans in the form of a Ginnie Mae MBS. HECMs are commonly referred to as reverse mortgages, and are designed to allow older homeowners to convert the equity in their homes to monthly streams of income or lines of credit.

"The Ginnie Mae HECM MBS is an extension of our existing mission to expand access to affordable housing opportunities in America," said Robert M. Couch, President of Ginnie Mae. "Home values have grown significantly over the years, and reverse mortgages are a good way for many seniors to stay in their homes, maintain ownership, and access an additional stream of income to enhance their retirement."

The Ginnie Mae HECM MBS will provide the mortgage-backed securities marketplace with a full faith and credit vehicle for the securitization of HECMs. The HECM MBS will increase liquidity by providing capital market funding sources to primary market HECM lenders, broadening distribution channels for HECM loans and expanding the investor base for the HECM product.

The increased competition among lenders should result in expanded product offerings and reduced costs to borrowers. The Ginnie Mae guaranty allows mortgage lenders to obtain better pricing for their mortgage loans in the secondary market.

"The HECM program is clearly a key growth area for FHA. We're working hard to ensure that we keep pace with the needs of our low-to moderate-income borrowers, making programmatic changes to keep up with the times," said Federal Housing Commissioner Brian D. Montgomery. "Ginnie Mae's securitization of HECMs will help us keep pace."

Under the Ginnie Mae structure, approved issuers will have the flexibility to pool HECM loan draws and securitize the balance through a Ginnie Mae security. The HECM MBS will be a new class of Ginnie Mae security under the umbrella of the Ginnie Mae II Custom Program. The HECM MBS will be an accrual class pass-through security. Accordingly, the HECM MBS will not have a payment schedule. Rather it will accrue interest on the securitized principal until such time as payoffs are received. The HECM MBS can be sold to investors as a stand-alone security or be used as collateral for a Ginnie Mae Real Estate Mortgage Investment Conduit (REMIC).

Reverse mortgages allow homeowners aged 62 and over to convert home equity into cash while living at home for as long as they wish. Borrowers continue to own their homes, and do not need to make any monthly payments. Instead, they can choose to receive the funds as a lump sum, line of credit, or monthly payment. The loan comes due only when the last borrower moves out, dies, or sells the home.

According to a 2006 Government Accountability Office (GAO) report, today's older Americans are expected to comprise a larger share of the population, live longer, and spend more years in retirement than previous generations. Americans 65 and older now total about 34 million people. This number is expected to reach 70 million by the year 2030.

The Center for Retirement Research has found that 43 percent of working households were in danger of having too little income to fund their retirement needs. Historically, retirees have not viewed primary residence equity as a source of consumable wealth, except in the case of financial emergencies. Reverse mortgages are expected to become more attractive.

The creation of a secondary market by Ginnie Mae is a vital enhancement to HECM lending and will provide the platform for lenders to repackage their capital into new loans and attract new lenders.

Ginnie Mae is a wholly owned government corporation within the U.S. Department of Housing and Urban Development. Ginnie Mae pioneered the mortgage-backed security (MBS), issuing the very first security in 1970. An MBS enables a mortgage lender to aggregate and sell mortgage loans as a security to investors. Ginnie Mae securities carry the full faith and credit guaranty of the United States government, which means that, even in difficult times, an investment in Ginnie Mae is one of the safest an investor can make.