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Ginnie Mae outlines recovery planning requirements for issuers with over $50 billion
On May 20, Ginnie Mae released “APM 24-08: Mandatory Recovery Planning Requirements for Certain Issuers,” which outlined Ginnie Mae’s introduction of recovery planning requirements for issuers whose portfolios exceed $50 billion. Issuers will be required to submit recovery plans to Ginnie Mae no later than June 30, 2025. The submitted recovery plans must include, among other things, corporate structures (like organizational charts, locations, key personnel, etc.), information systems (detailed inventory mapping of management systems and processes), and recovery planning (which would meet the requirements of the Ginnie Mae Guaranty Agreement and included a plan to unwind its MBS portfolio in a timely and efficient manner). Covered issuers will be required to demonstrate their assessment of the risks that their organizational structure and business activities pose and that they have taken steps to mitigate such risks. Further, covered issuers must update their plans every two years or confirm their prior plans remain current. More details can be found within the two attachments: the Issuer Recovery Plan Requirements, and Chapter 3 of the Ginnie Mae MBS Guide.
New York Fed reports on community development financial institutions
On May 8, the New York Fed released a report examining both the origination and sale of loans by community development financial institutions (CDFIs) and found that loans of both types more than doubled from 2018 to 2022. According to the report, in 2022, CDFIs originated $67 billion and sold $14 billion of loans, which was a major increase since 2018, where CDFIs originated $29 billion and sold $6 billion of loans. This doubling also contributed to some market concentration: The 10 most active CDFIs in 2022 originated over 25 percent of the total origination volume and 75 percent of the total sold loan volume. The report stressed “nearly all loan sales to Ginnie Mae and life insurance companies” were sold from the most active sellers.
On breakdown, the New York Fed found residential (single family) loans as the highest volume collateral data type, far outpacing lines of credit, multifamily, commercial real estate, and business. There were also a high number of CDFI originations in California and Florida, and credit unions were the most active originators over banks, thrifts, or loan funds.
On May 14, a member of the Fed Board of Governors Lisa Cook spoke on how CDFIs impact communities positively and some of the challenges CDFIs face. Cook noted specifically that CDFIs often “continue their work with borrowers even after loans are made… helping them through rough spots, should borrowers experience difficulty repaying loans,” which were unique among the CDFI borrower-banking relationship. On challenges, Cook noted how demand for capital was outpacing the current supply: Federal funding tied to past pandemic relief programs have dried up, leading to the challenge of building out long-term capital sources for future CDFI demand. She closed by emphasizing the importance of the CDFI industry and her continued support of CDFIs.
Ginnie Mae now requires issuers to disclose cybersecurity incidents within 48 hours
On March 4, the President of Ginnie Mae released All Participants Memorandum (APM) 24-02, which set forth a new requirement applicable to all issuers, including issuers that subservice loans for others. The memo mandated that all approved issuers must notify Ginnie Mae of any significant cybersecurity incident within 48 hours of detection. Ginnie Mae defined a “Cyber Incident” as “an event that actually or potentially jeopardizes, without lawful authority, the confidentiality, integrity, or availability of information or an information system; or constituted a violation or imminent threat of violation of security policies, security procedures, or acceptable use policies and has the potential to directly or indirectly impact the Issuer’s ability to meet its obligations under the terms of the Guaranty Agreement.” If a Cyber Incident has occurred, issuers must it report to Ginnie Mae via a specified email address and must include (i) the date and time of the incident, (ii) a summary of the incident, and (iii) points of contact responsible for coordinating any follow-up questions regarding the incident. These requirements are also now reflected in Chapter 03, Part 18 of the Mortgage-Backed Securities Guide, 5500.3, REV-1.
Ginnie Mae to explore a new reverse MBS
On January 16, Ginnie Mae announced its plans to consider the development of a new securitization product in connection with broader efforts to expand its existing Home Equity Conversion Mortgage (HECM) mortgage-backed securities program. Specifically, Ginnie Mae is considering the viability of a securitization product that would accept HECM loans with balances above 98% of the FHA’s Maximum Claim Amount. Ginnie Mae stated that the proposed product reflects efforts to address liquidity issues affecting the stability of secondary mortgage markets, which are crucial for older Americans who may need to rely on home equity for financial support.
Ginnie Mae released the Social Impact and Sustainability Framework and supports broader access to mortgage financing
On September 14, Ginnie Mae announced the launch of its “Social Bond” label to indicate underlying collateral that is designed to support a positive social and affordable housing outcome, and released the Social Impact and Sustainability Framework.
The “Social Bonds” revision to Ginnie Mae’s standard forms of prospectus details attributes of Ginnie Mae MBS to provide transparency to investors. The insurance or guaranties extended under certain government programs reduce borrower credit risk, which promotes broader access to mortgage credit and/or less costly credit for borrowers, thereby expanding homeownership access and affordability among targeted populations (low-to-moderate income borrowers, veterans, senior citizens, rural communities, and/or tribal, Alaska Native, and Native Hawaiian communities).
The Social Impact and Sustainability Framework highlighted Ginnie Mae’s role in connecting the global capital markets to America’s housing financial system and providing liquidity to support access to affordable housing and lending for first first-time homebuyers, low-to-moderate income households, veterans, seniors, and members of urban, rural, and tribal communities from inception.
FHFA, Ginnie Mae update minimum financial eligibility requirements for enterprise seller/servicers and issuers
On August 17, FHFA and Ginnie Mae released a joint announcement regarding updated minimum financial eligibility requirements for seller/servicers and issuers. Ginnie Mae also updated its requirements for servicers of Ginnie Mae mortgages in coordination with FHFA. According to the standards, sellers and servicers will be required to maintain a base net worth of $2.5 million plus 35 basis points of the unpaid principal balance for Ginnie Mae servicing and 25 basis points of the unpaid principal balance for all other 1-to-4-family loans serviced. Fannie and Freddie sellers and servicers would be required to maintain a capital ratio of tangible net worth to total assets that is greater than or equal to 6 percent. Depository institutions would continue to rely on their prudential regulatory standards to meet the GSEs’ capital and liquidity requirements. According to HUD Secretary Marcia L. Fudge, the standards “ensure that we continue to address the needs of underserved communities through easy, equitable and sustained access to mortgage credit.” FHFA also released FAQs regarding the seller/servicer minimum financial eligibility requirements, and Ginnie Mae released eligibility requirement comparison tables.
FHA issues RFI on Title I Manufactured Housing Programs
On August 11, FHA and Ginnie Mae issued FHA INFO 2022-76, which seeks public feedback on their Title I Manufactured Housing Programs. According to the request for input, FHA and Ginnie Mae are seeking input on, among other things: (i) opportunities to improve the use and effectiveness of the Title I manufactured housing program; (ii) Title I lender eligibility requirements; and (iii) how to make the programs more competitive in the primary and secondary markets. Responses are due by September 26.
Ginnie announces Digital Collateral Program and eGuide enhancements
On May 23, Ginnie Mae announced enhancements to its Digital Collateral Program and released updated guidance for the securitization of eNotes. According to the announcement, the revised Digital Collateral Guide (eGuide) applies to all existing eIssuers and provides eligibility and technological requirements for interested applicants. The announcement noted that Ginnie Mae’s digital program has received continued interest since Ginnie Mae securitized its first eNote in January 2021. The current participants in the Ginnie Mae program are existing issuers, which is a requirement under the program. After a successful pilot phase of its new Digital Collateral Program, Ginnie Mae said that it will reopen the program to new applicants on June 21. Additionally, enhancements to the program include the ability to perform eModifications to eNotes, streamlined procedures for Release of Secured Party requests, and the acceptance of eNotes using a Power of Attorney. The eGuide updates are effective June 1.
FHFA re-proposes GSE seller/servicer eligibility requirements
On February 24, FHFA re-proposed updated eligibility standards that Fannie Mae and Freddie Mac (collectively, GSEs) mortgage sellers and servicers would have to meet. The updated proposed requirements are designed to provide transparency and consistency of capital and liquidity requirements for sellers and servicers with different business models, and would differentiate between the servicing of Ginnie Mae mortgages and GSE mortgages. FHFA noted that the updated proposed requirements, which reflect coordination with other federal agencies, also incorporate feedback from a January 2020 proposal (covered by InfoBytes here), as well as lessons learned from the Covid-19 pandemic.
Under the updated proposed requirements, all GSE sellers and servicers (both depositories and non-depositories) would be required to maintain a tangible net worth requirement of $2.5 million, plus 35 basis points of the unpaid principal balance for Ginnie Mae servicing and 25 basis points of the unpaid principal balance for all other 1-to-4 unit residential loans serviced, including GSE loans. Current GSE sellers and servicers, as well as new applicants, will be required to comply with the updated proposed requirements by December 31, 2022, minus the exception that Capital and Liquidity Plan requirements must be submitted to the GSEs by December 31, 2023, and are due annually by the end of each year thereafter. Comments on the proposed changes are due in 60 days. FHFA stated it anticipates finalizing the updated proposed requirements in the second quarter of 2022, with most requirements taking effect six months after finalization.
FHFA gives guidance on FHLB investments
On August 16, FHFA issued Advisory Bulletin AB 2021-02, which provides guidance regarding federal home loan banks’ investments in Agency Commercial Mortgage-Backed Securities (CMBS) that are issued and guaranteed by either the U.S. government (Ginnie Mae), or by government-sponsored entities Fannie Mae and Freddie Mac. The Bulletin recommends risk management practices, such as establishing certain limits to address the risks associated with unexpected prepayments of CMBS investments. FHFA also “encourages early adherence” to the guidance, but states that “by December 31, 2021, all Banks should have appropriate Agency CMBS concentration risk limits in place.” Guidance in the Bulletin includes, among other things: (i) pre-purchase analytics; (ii) the minimum risk-adjusted spread requirement; (iii) concentration limits; (iv) reporting; and (v) prepayment projections.