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Financial Services Law Insights and Observations

Ginnie Mae seeks feedback on plan to stress test non-bank issuers

Agency Rule-Making & Guidance Ginnie Mae MBS Stress Test RFI

Agency Rule-Making & Guidance

On July 23, Ginnie Mae published a Request for Input (RFI) seeking feedback on its plan to monitor and support the sustainability of the Ginnie Mae mortgage-backed securities (MBS) market, by developing a stress test framework for its non-bank issuer base. The RFI notes that, after reviewing two approaches to the stress test framework, Ginnie Mae elected to adopt a framework that forecasts an issuer’s financial performance over the next eight quarters under a base and adverse scenario. The framework would provide the following outputs: (i) a balance sheet, income statement and cashflow statement; (ii) a “Projected Issuer Risk Grade” (Ginnie Mae’s proprietary risk rating method); (iii) projected issuer compliance with Ginnie Mae and Government Sponsored Enterprise net worth, liquidity and capitalization requirements; (iv) projected compliance with common warehouse covenants; and (v) projected risk of insolvency. The RFI provides significant details on the framework, including details regarding the various structural components that will form its basis. The RFI lists four specific topics that responders may provide input on and requests that responders expand on the topics as appropriate to address related questions or implications. Comments must be submitted by August 31.