Q&A: Does Ginnie Mae Mean Lower Rates?

Question: I am thinking of making a reverse mortgage on our house. How much less expensive has the new Ginnie Mae backed mortgages made this type of loan as opposed to six months ago? Also-has the age been lowered to 60 from 62?

Answer: Ginnie Mae is a federal agency which buys loans from local lenders, packages them and then sells the securities to investors who — in turn — receive dividends. The money paid by Ginnie Mae gives new cash to lenders which allows them to make more loans and re-start the cycle.

It is very difficult if not impossible to demonstrate how much the secondary market — the market for local loans — reduces interest costs. However, what the secondary market plainly does is to inject additional capital into the system. That means more reverse mortgage money is available for borrowers and that is an essential good. However, more money (supply) does not necessarily mean lower interest costs because you also need to look at demand — do more people want reverse loans relative to supply?

As to ages, the FHA reverse mortgage program requires borrowers to be age 62 and above. There are several private plans which allow borrowers to obtain a reverse mortgage at age 60.

As in all cases with reverse mortgages, look at programs and their costs with care.

The initial Ginnie Mae news release can be found by pressing this link: http://www.ginniemae.gov/news2007/11-09presshud.asp?Section=Media

This entry was posted on Wednesday, December 12th, 2007 at 2:54 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.