Fannie Mae's Reverse Mortgage Program Gets Off the Ground, Slowy

After a sluggish start in which more than $1 million was spent to lay groundwork, the Federal National Mortgage Association says its reverse mortgage program is finally taking shape.

Lenders have closed 35, or $5.5 million worth, of Fannie Mae's Home Keeper reverse mortgages in the program's first six months. Continuing that pace would mean the agency will fall well short of its initial plan to make $1 billion of the loans in the first year.

But the mortgage agency still believes the program - designed primarily to let senior citizens tap the equity in their homes - will come up a winner. "We're still on track" to hit $1 billion, said Robert J. Sahadi, vice president for housing initiatives at Fannie Mae, but the goal line has now been moved to 18 months, from 12, he added.

But not everyone is a fan of reverse mortgages. The products give customers cash based on a complicated equation that considers, among other measures, a home's worth and its owner's life expectancy. Critics say the product gives too little back to senior citizens, who may not realize how it works. Heirs have also opposed reverse mortgages because the lender can end up owning the home after its owner dies.

Mr. Sahadi said the product may not be right for everyone but is appropriate for a share of the nation's millions of people older than 65.

Lenders, including 50 that have already signed up for the program, will complete 750 to 1,000 such loans in the next six months, Mr. Sahadi said.

Wendover Funding, a mortgage unit of State Street Boston Corp., is among those offering the Home Keeper product - and demand is solid, said Michael A. Hyman, a senior vice president.

Wendover and its network of correspondents have accounted for one-third of the volume so far, he said, and it "will grow exponentially."

But Mr. Hyman and other lenders said the product took an unexpectedly long time to come to market.

Mr. Sahadi accepted that assessment. Fannie Mae, while spending more than $1 million to get the product to market, he said, had to resolve time- consuming regulatory issues.

The agency had to register the reverse mortgage on a state-by-state basis. Fannie Mae also encountered a group of states, including New York and Washington, that ban Home Keeper-type products.

At the same time, Mr. Sahadi said, loan officers had to be taught about reverse mortgages and their appropriate use. Once the officers are trained, they must spend four times as long to close a loan as a conventional mortgage takes.

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