Reverse Mortgages and Linked Securities: The Complete Guide to Risk, Pricing, and Regulation
208
Reverse Mortgages and Linked Securities: The Complete Guide to Risk, Pricing, and Regulation
208eBook
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Overview
Reverse Mortgages and Linked Securities
An institutional investor's guide to reverse mortgage securitization
Many seniors have lost their nest eggs during the most recent economic crisis and are looking to supplement their retirement savings by extracting equity from their homes by way of reverse mortgages. With contributions from many of the leading minds in the Home Equity Conversion Mortgage (HECM) industry, Reverse Mortgages and Linked Securities offers specific strategies that will help institutional investors to benefit from the resurgence of reverse mortgages and linked securities. It discusses the securitization of reverse mortgages and other linked securities and includes coverage of pricing techniques and risk mitigation. This reliable resource also takes the time to cover the current regulatory environment of the HECM market, which is constantly changing due to the current state of the real estate market.
Over the next five to ten years, the reverse mortgage will play an increasingly important role in the market for structured financial products, and a strong understanding of it on the part of financial services firms will be vital to compete in the modern marketplace. Reverse Mortgages and Linked Securities provides institutional investors with a solid foundation for understanding the mechanics of the reverse mortgage transaction.
Contributors include: Micah Bloomfield of Stroock & Stroock & Lavan LLP; Michael V. Fasano of Fasano Associates; Kai Gilkes, Victoria Johnstone, Apea Koranteng, Karen Naylor, and Andrea Quirk of Standard & Poor's; Peter Macrae Mazonas of Life Settlement Financial, LLC; Olivia S. Mitchell of The Wharton School; Nemo Perera and Chris DeSilva of Risk Capital Partners; John Piggott of the University of New South Wales; Joseph Selvidio of Stroock & Stroock & Lavan LLP; Charles Stone of Brooklyn College; Boris Ziser of Stroock & Stroock & Lavan LLP; and Anne Zissu of Citytech, City University of New York.
Product Details
| ISBN-13: | 9780470921517 |
|---|---|
| Publisher: | Wiley |
| Publication date: | 10/26/2010 |
| Series: | Wiley Finance , #577 |
| Sold by: | JOHN WILEY & SONS |
| Format: | eBook |
| Pages: | 208 |
| File size: | 2 MB |
About the Author
Vishaal B. Bhuyan has been involved in the "life markets" for over five years and has focused on analyzing and investing in life settlements, reverse mortgages, and other linked assets. He has advised a number of large investment funds on the longevity and mortality risk asset class and has been invited to speak at various investment and industry-specific conferences across the United States, Europe, and Asia. Bhuyan is also the editor and coauthor of Life Markets: Trading Mortality and Longevity Risk with Life Settlements and Linked Securities (Wiley) and will be releasing The Esoteric Investor (FT Press) in 2011.
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Table of Contents
Preface.
Acknowledgments.
List of Contributors.
Part One Reverse Mortgage Basics.
Chapter 1 Reverse Mortgage Primer.
Loan Disbursements.
Overview of Lender Challenges.
Summary.
Chapter 2 The History of Reverse Mortgages – an Insider's View.
Formative Years.
Private Programs.
First Lifetime Reverse Mortgages.
Fannie Mae Stakes a Claim to the Marketplace.
Roots of the Securitization of Reverse Mortgages.
Summary.
Chapter 3 HECM Explained Reverse Mortgages Originated through the Home Equity Conversion Mortgage (HECM) Program.
Legislative History and Program Fundamentals.
Disbursing Funds and Calculating Loans and Interest.
Changes to the Program Following the 2008 Act.
Consumer Focused Elements of the Program.
Summary.
Part Two Underwriting and Risk Analysis.
Chapter 4 Underwriting Reverse Mortgages.
Underwriting Life Expectancy.
Life Settlement versus Reverse Mortgage Underwriting.
Simplicity of the Current Reverse Mortgage Underwriting Process.
Why Does Underwriting Matter?
Proposed Elements of Reverse Mortgage Underwriting.
Summary.
Chapter 5 Risk Mitigation from Existing and Proposed Financial Products.
Reverse Mortgage Risks.
Agency versus Non-Conforming Loans.
Summary.
Chapter 6 Longevity Risk and Fair Value Accounting.
Longevity Cost Calculator™ as a Loan Underwriting and Pricing Tool.
Reverse Mortgage Loan Pricing Using the Longevity Cost Calculator
Existing Accounting Framework.
Suggested GAAP Compliant Methodology to Standardize Life Settlement Underwriting.
Summary.
Chapter 7 Risk Mitigation Available Hedges & Products in Development for Risk Transfer.
Hedging Crossover Components in the Capital Markets.
Insurance Solutions.
Summary.
Chapter 8 Criteria for Rating U.K. Reverse Mortgage-Backed Securities.
Overview of Reverse (Equity Release) Mortgages.
Reverse Mortgage-Backed Securitization.
Mortality Assumptions.
Prepayment Assumptions.
House Price Increase Assumptions.
HPI in Year 1.
HPI in Years 5–15.
HPI in Years 16 to Legal Final Maturity Date.
Costs and Sale Period.
Summary.
Part Three Tax Treatment.
Chapter 9 United States Federal Income Tax Aspects of Reverse Mortgages.
What is a Reverse Mortgage?
Deductibility of Interest Payments on Reverse Mortgages.
Securitization of Reverse Mortgage Loans Through REMIC Structures.
Practical Observations Regarding Investment Reverse Mortgage REMIC Securities.
Summary.
Part Four Reverse Mortgages in Context.
Chapter 10 Unlocking Housing Equity in Japan.
Implementation in the Japanese Context.
Feasibility of Reverse Mortgages in Japan.
Summary.
Chapter 11 The Secondary Market in Home Equity Conversion Mortgages.
The Reverse Mortgage to Liquidate Home Equity.
HECM: A Financial Innovation.
Cash Flows, Risk, and Uncertainty.
The Secondary Market for HECM.
HECM Securitization.
Longevity Risk Embedded in HECM.
The Constraints of the Underlying Asset.
Concluding Remarks.
Summary.
Appendix A Housing Wealth Among the Elderly.
Wealth in housing.
Owner-occupancy Rates.
How Risky is Housing Wealth?
Do the Elderly Decumulate their Housing Wealth?
Appendix B: Reverse Mortgage Analytics.
Determining the Payout Values: Practical Considerations.
Computing Payout Values: An Example.
Endnotes.
Glossary.
About the Author.
About the Contributors.
Index.