Page 361 - 2019 6th AFIS & ASMMA

government guarantees mortgages; the government guarantees both the up owning about 75 percent of the market as a whole. So in this sense
borrower and the lenders; to the borrower's, it guarantees the continuous HECM was pretty similar to the US mortgage market before the pre-
cash flow availability, even if the original lender defaults. To the lenders, mortgage-backed-securities era of 1950s and 60s.
if the property used as collateral for the loan is not enough for the loan
payment, the loss is covered by the government.

Currently, 62 years old is the minimum requirement age. If you're
about 65 years old, assuming the you are going to die around 85 or 90,
you know you can borrow only about 50 to 60 percent of your house
value. The loan years is non-recourse, which means the maximum loss
for the borrower can face is losing the house. Because of the guaranteed
features, the borrowers have to pay interest premium, which turns out
to be pretty steep; upfront premium is going to be 2 percent of the
loan amount, and the monthly payment is going to be 0.5% of the loan
amount. Session III

Now what happens here is that during the crisis the whole scene of the
market dramatically changed. So during the crisis, all the major lenders,
the Bank of America, Wells Fargo, and MetLife, all exited the market,
because of the losses. And Fannie Mae also exited the market at the same
time. So all in within a year or two, the HECM market actually lost all
the major lenders and investors. And though the gap was eventually filled
by much smaller non-depository financial institutions in the primary
market, it was also filled by the securitized products proposed by Ginnie
Mae HMBS.

So currently the structure is this; most of the mortgage loans are
originated by non- banking, non-depository financial institutions. And
All right, so let me give you some brief history about the products. once originated, those loans will be sold in the secondary market, as a
The primary market for the HECM before the financial crisis was form of reverse mortgage-backed security. So this kind of shows you the
really dominated by the large banks. Three large lenders at the time history of how the loan origin had happened.
were Wells Fargo, Bank of America and MetLife. On the other hand, in
the secondary market, the major player was a Fannie Mae, who ended

362 2019 6th AFIS & ASMMA Annual Meeting 363