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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.
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.
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.
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.
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.
On December 7, Ginnie Mae issued APM 20-17 extending the temporary exclusions announced in APM 20-06 (previously covered here) for issues in calculating delinquency ratios. Specifically, Ginnie Mae will continue to exclude any delinquencies occurring on or after April 2020 when calculating the ratio. Ginnie Mae will provide this exclusion automatically through July 31, 2021 to issuers who were compliance with the delinquency rate thresholds as demonstrated by their April 2020 investor accounting report, reflecting March 2020 servicing data.
On September 21, Ginnie Mae issued All Participant Memorandum 20-12, which states that Ginnie Mae will stop accepting the delivery of single-family forward adjustable rate mortgage (ARM) loans, dated on or after January 1, 2021, with any interest term based on LIBOR, for securitization in any pool. Additionally, any adjustable rate reverse mortgages (HECMs) will be ineligible for securitization into any HMBS pool that relies on LIBOR if not securitized as of January 1, 2021, “without regard to their date of origination or the date in which the corresponding FHA case number was assigned.” Participations associated with HECM loans backing HMBS will continue to be eligible without restriction, so long as the issuance date is on or before December 1.
On May 14, Ginnie Mae issued APM 20-06 on the treatment of mortgage delinquency ratios for users affected by Covid-19. Under the Mortgage Backed Securities Guide, an issuer that fails to maintain delinquency rates below certain specified threshold levels may be subject to sanctions. Recognizing that Covid-19 related hardships may cause issuers to experience delinquency rates that exceed the maximum thresholds, effective immediately, Ginnie Mae will exclude any new issuer delinquencies occurring on or after April 2020 when calculating the delinquency ratios. This exclusion will automatically apply to issuers that had delinquency rates below the applicable thresholds as reflected by their April 2020 investor accounting report, reflecting March 2020 servicing data. Issuers that were not compliant with these provisions as of their April 2020 report must contact their Account Executive to determine their eligibility for this exclusion. The exemptions and delinquent loan exclusions automatically expire on December 31, 2020, unless rescinded earlier or extended by Ginnie Mae, or the end of the national emergency, whichever comes earlier.