Volume 7 - Number 8
April 11, 2014
GNMA Bars HECMs with Fixed-Rate Future Draws
Beginning June 1, 2014, securitizations backed by Home Equity Conversion Mortgages may not include HECM loans that provide for future draws at a fixed rate of interest. Specifically, Ginnie Mae warned that the potentially excessive risk associated with such HECM loans might be more than what the agency could handle in the event of an issuer default. The prohibition applies to fixed-rate HECM loans where the borrower has the option to select a payment plan that allows future advances against the principal limit. These loans give rise to the risk that such advances will become uneconomic should interest rates rise from when the loan is originated, according to Ginnie Mae. The impact of negative spreads between a fixed noted rate and future prevailing rates could be ...
Subscribers to Inside FHA/VA Lending have full access to all its stories and data online. Visitors may become subscribers for full access or may purchase individual articles and data.
Subscriber Log In
If you are a current subscriber or already purchased this article, please login below.