Exciting developments
Wong explained that he and his colleagues at Waterfall were intrigued to watch Ginnie Mae outline new details about its proposed product.
“From our standpoint, I think this is one of those things where we were very excited to hear the news, and most of the industry participants as well,” he said. “I think the industry as a whole has responded pretty favorably to the news. Ginnie Mae has demonstrated a serious commitment to reverse mortgage products through their HECM-backed securities program.”
Waterfall has been in the HECM space for more than 10 years, Wong explained. One thing that stands out about the new term sheets is that Ginnie Mae appears to be focused on improving the structure of the HMBS market, Wong said.
“[Ginnie Mae has] “There's been a lot of transparency about how the securities support both issuers and investors,” he said. “From my perspective, Waterfall has certainly seen firsthand how aggressively Ginnie Mae and FHA have acted here in stabilizing the market, particularly after the Reverse Mortgage Funding (RMF) collapse.”
This will also include changes to the Federal Housing Administration’s (FHA) HECM program, as well as adjustments aimed at improving the customer service experience.
“Most obvious is the alignment of the end goal of providing financial solutions to consumers, particularly older homeowners,” Wong says, “and there is strong collaboration in Washington, DC, and within the industry, led by the National Reverse Mortgage Lenders Association (NRMLA), which is a leader in these change-making efforts.”
Wong added that the simplicity of the program is a notable feature, saying it will “act as an extension of programs the market is already familiar with and will significantly improve the liquidity of this government program.”
The ongoing impact of lender failures
The collapse of RMF in late 2022 was a major event for the reverse mortgage industry, putting further pressure on various stakeholders, including lenders, creditors and bond purchasers.
“[That incident] “We really pressure tested a lot of the existing liquidity mechanisms, such as securitization programs and rating agencies, to see how they view the products,” Wong said.
But the observation that arises from that is that addressing these challenges is a collaborative effort, and greater involvement from the FHA and Ginnie Mae should help boost confidence across the market, he added.
“I think so [HMBS 2.0] “It could potentially increase investment and liquidity in the reverse mortgage market,” he said. “For one thing, I strongly believe this will allow lenders to really focus on the loan side. It will allow counterparties and balance sheet participants to be more constructive about growth and put capital where it's needed to grow their businesses.”
Wong said he was also watching with interest as forward mortgage providers expanded their product offerings to include reverse mortgages.
“The general view on the mortgage finance ecosystem is that we're seeing new non-bank lenders moving away from the traditional 30-year fixed-rate mortgage to offering reverse mortgages,” he said. “For all these reasons, liquidity is critical because now everyone is focusing their energies on hopefully growing their business, not on liquidity on government-guaranteed products.”
More information from Leo Wong on HMBS 2.0 coming soon.