Reverse Mortgage Lenders Get Creative to Fund Ginnie Mae HMBS

Reverse mortgage originators who fund loans through Ginnie Mae are turning to middle men in order to get needed liquidity. One of those facilitators is Knight Libertas, Jersey City, N.J., which describes itself as “the leading source of off-exchange liquidity in U.S. equities…with a greater share volume than any U.S. exchange.”

David Fontanilla, formerly vice-president, Deutsche Bank Securities Inc., Securitized Products Group, is representing Knight to the reverse mortgage sector, according to those now doing business with him. While at DB, Fontanilla called himself “the only dedicated reverse mortgage trader on [Wall] street.” Asked about his new role, he declined comment citing lack of permission to comment publicly about it.

However, Torrey Larsen, president, Security One Lending, San Diego, who has worked with Knight Libertas for several months, did provide some details to RMD. “They provide liquidity for our firm,” Larsen reports, noting that “there is not a lot of liquidity or partners who want to take time to understand reverse mortgages.”

In exchange for Knight providing a “repo-line”, Security One permits the firm to distribute its loans “so they can securitize and distribute to investors,” according to Larsen. “We fund the loan and sell it to an investor and the money comes back to the warehouse line so we can turn it two or three times a month.” he says, adding:

“With $20 million, I can fund $60 million [in reverse mortgages] per month. It’s the only way we can begin to accumulate enough funding to do a Ginnie Mae security,” says Larsen.  Security One Lending, which acquired Omni Reverse earlier this summer, funds 120 to 150 units per month, according to Larsen.

Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at [email protected]

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