result of Fannie Mae's support for a new line of reverse mortgages. The mortgage loans are called reverse mortgages because, in some versions, borrowers can receive monthly payments instead of making them. In all cases, the lender receives no payments until the house is sold. Fannie Mae - the Federal National Mortgage Association - announced Thursday that it would buy the mortgages, enabling lenders nationwide to offer them to the public. The giant housing finance agency has high hopes that the mortgages will become a standard product and anticipates buying about $1 billion of them next year. Reverse mortgages, which allow senior citizens to draw on the equity in their homes, have been available for years on a small scale but have never caught on in a big way. But lenders believe the loans could take off now that Fannie Mae has put its considerable weight behind them. "The fact Fannie Mae is going to do this will really push these products into the limelight," said Paul Reid, president of American Home Funding, the mortgage unit of New York's Rochester Community Savings Bank. "Until now, there wasn't a real good market" for the loans, Mr. Reid said. "This will help seniors achieve their goal of remaining financially independent while in their homes," said Frank Raines, vice chairman of Fannie Mae. In fact, Fannie Mae sees reverse mortgages becoming a staple on lenders' home loan lists. "It's going to be one of the standard mortgage products available in America," said Robert J. Sahadi, Fannie's vice president of housing initiatives. Mr. Sahadi said Fannie Mae is demonstrating its belief in the products' widespread appeal by getting behind them. The program will begin in January with a limited number of lenders and then fan out during the year. The products, which will carry a variable rate, will use home appraisals and life expectancy tables to help determine terms. Borrowers can tap the equity as a line of credit, by receiving monthly payments, or through a combination of both. Observers said Fannie's program, dubbed the Home Keeper, would finally set standards for a type of loan that has shown promise but has received insufficient support for the last decade. "This is a very positive step, because we need a unified and conventional product in the marketplace," said Mark L. Korell, group president at Norwest Mortgage Inc., Des Moines. Indeed, until now, distribution was limited to a handful of private lenders and a limited effort by the Department of Housing and Urban Development. About 15,000 of the loans have been originated in the last 10 years, according to Transamerica Corp., a private originator. A spokesman for the San Francisco company said Fannie Mae's entry will help validate the industry. However, the spokesman declined to comment on what effect Fannie's move would have on a market that private lenders have had much to themselves. Mortgage bankers say the involvement clearly opens the market to them, since they will now have a path to follow, from educating consumers to originating the loans and selling them to Fannie Mae. "It will be good to have a conventional mortgage with a standardized secondary market," Mr. Korell said. Mr. Raines indicated Fannie Mae would not place a cap on how many loans it would support. "We'd be delighted to do billions and billions of dollars of this product," he said. While many bankers are apparently waiting to become involved, not everyone is jumping on the bandwagon. For instance, Freddie Mac, the industry's other giant home-loan guarantor, has no immediate plans to follow its rival. It will, however, continue to gauge lender interest in this type of product, a spokeswoman said. And one industry observer said there may be problems at the tail end, when the loan must be settled. "In many cases, there are heirs - children of the person who got the reverse mortgage - who want to stay in the home," said Allen Hardester, director of marketing at Coastal Mortgage of Maryland, Baltimore. "It doesn't sit very well" that such people are expected to leave, Mr. Hardester said. Mr. Raines indicated that Fannie expects few problems of that type, since heirs will likely know well in advance about the reverse mortgage arrangement.

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