The Office of Thrift Supervision has cleared the way for thrifts to originate Fannie Mae's new reverse-annuity mortgages, as long as they are sold immediately to the secondary market agency.
Fannie Mae's reverse-annuity mortgages allow borrowers 62 years old or older to borrow against the equity in their homes. Borrowers repay principal and interest once they stop using the homes as principal residences.
Responding to an inquiry from Fannie Mae, Carolyn Buck, OTS chief counsel, said thrifts may originate each of the standard variations on the loan product. These allow borrowers to receive payments in monthly installments, through a revolving line of credit, or a combination of the two.
Ms. Buck also said that thrifts may make such loans with an equity share option that enables the customer to borrow a larger amount of principal.
In exchange for the larger principal, which raises the loan-to-value ratio and thus the risk of the loan, the borrower agrees to pay an additional fee, equal to 10% of the property's value, when the loan matures.
Because thrifts are not allowed to make equity investments in real estate, there was some question as to whether the additional fee would be a prohibited investment.
Ms. Buck, in her opinion, said it would not.