Fannie Mae is setting tough standards for the scores of lenders that will begin using its reverse mortgage program this month.
"We're asking for a lot more dedicated resources both on the origination and servicing side," said Robert J. Sahadi, vice president for housing initiatives at Fannie, formally the Federal National Mortgage Association.
The edict comes two months after Fannie Mae said it would mount the industry's first widespread push into reverse mortgages. The products allow senior citizens to tap the equity in their homes by receiving regular payments or a line of credit that is payable when the home is sold.
To encourage lenders, Fannie Mae ultimately plans to pool the loans for sale in the secondary market. Initially, though, Fannie will hold the loans in its portfolio to build volume.
Business will not be hard to come by if initial interest is any indication. Since November, more than 80,000 consumers have jammed public information lines at Fannie Mae, seeking information about the products. Fannie has also received inquiries from more than 200 lenders that want to offer the products, Mr. Sahadi said.
Lenders will have to send their loan officers to classes that Fannie will sponsor on the mechanics of making and servicing reverse mortgages.
Fannie has begun the classes in each of its five regions. The agency expects to have a few hundred loan officers trained by the end of January, Mr. Sahadi said.
As part of loan servicing, Fannie Mae is telling lenders to pay ongoing attention to the property. The agency wants regular inspections "to make sure the roof isn't leaking and shingles aren't falling off," Mr. Sahadi said.
Lenders are also being told to make consumer education a priority. "This is not a real quick sell," Mr. Sahadi said.
Lenders can expect to spend two or three times as long with reverse mortgage borrowers as they do on conventional loans, Fannie Mae estimates.
The agency is also warning mortgage bankers not to set their sites too high. Lenders should not look at reverse mortgages "as the kind of product that people beat down the doors for," Mr. Sahadi said.
"This is more of a strategic product" that augments others, he said.
A number of lenders are already sold on the product.
"We intend to make every effort to offer it," said Paul S. Reid, president of American Home Funding, Richmond, Va.
In fact, Mr. Reid is such a fan that he suggested his in-laws consider a reverse mortgage.
A number of private companies, meanwhile, continue offering their own versions of reverse mortgages on a limited basis. Household Senior Services, a sister company of Household Finance, is in the midst of adding 10 states to its marketing base of 14.
At the same time, the Wood Dale, Ill., company keeps looking over its shoulder at Fannie Mae. "It's going to be a challenge" going up against the agency's nationwide push, said Daniel Farnesi, vice president at Household Senior Services.
Industry observers said Household Senior Services and other companies with reverse mortgages may end up as niche players, working with jumbo and other borrowers that Fannie Mae prefers not to deal with.
