HMBS Program Description

The HMBS will be a new class of Ginnie Mae security backed by HECM loan participations under the umbrella of the Ginnie Mae II Custom MBS program. The HMBS will be an accrual coupon pass-through security. Issuers are only required to pass through payments to investors as loan payoffs occur. Pass-through payments will be applied pro rata across all participations collateralize a HMBS and any unsecuritized loan balance. Ginnie Mae HMBS will be book-entry securities, and may be held, sold to investors, or serve as collateral for Real Estate Mortgage Investment Conduits (REMICs). At this time, the HMBS would not be eligible collateral for the Ginnie Mae Platinum program.

Ginnie Mae’s HMBS is a standardized MBS which will be collateralized by FHA insured HECM loans. Ginnie Mae approved issuers will be able to pool HECM loan draws, servicing fees, and MIP advances and securitize these balances into a HMBS. The HMBS will be a new class of Ginnie Mae security backed by HECM loan participations under the umbrella of the Ginnie Mae II Custom Program. The HMBS will be an accrual class pass-through security. Accordingly, the HMBS will not have a payment schedule. Rather it will accrue interest on the securitized principal until such time that payoffs are received. The HMBS can be sold to investors as a stand-alone security or be used as collateral for a Ginnie Mae REMIC. The full faith and credit guarantee of the United States Government will serve to significantly broaden the investor base and stimulate a strong secondary market.

Ginnie Mae securities are actively traded in the global capital markets. Ginnie Mae is confident that investors will invest in its HMBS and thereby provide a robust secondary market for lenders to originate HECM loans, pool them into Ginnie Mae MBS, and sell them into the global markets. This liquidity will prove to be a great benefit for the senior homeowner. Our research indicates that the Ginnie Mae securitization of HECM loans will result in a savings of 50 basis points or more for the borrower. On an average HECM loan of $118,000, this savings amounts to over $10,000 over a 10-year period, the average life of a HECM loan.