|8/22/2019 - APM 19-06|
Ginnie Mae continually monitors Issuer performance and seeks to encourage Issuer practices that are consistent with its mission and the integrity of the Mortgage-Backed Securities (MBS) Program. As part of a series of counterparty risk management policy updates, Ginnie Mae is implementing the following requirements.
Rating Requirements for Issuers with a Servicing Portfolio Exceeding $25 Billion
To minimize potential exposure to large Issuer defaults, Ginnie Mae will be obtaining additional key risk indicators relating to servicing capability and creditworthiness. Effective September 1, 2020, Issuers with a Ginnie Mae Single-Family (SF) Servicing Portfolio Amount that exceeds $25 billion in UPB will be required to obtain an external primary servicer rating. For the purpose of this requirement, the term Ginnie Mae Single-Family Servicing Portfolio Amount is the sum of the unpaid principal balance of an Issuer’s outstanding Ginnie Mae SF MBS and HMBS for which it is the Issuer of Record in addition to the sum of the unpaid principal balance of any outstanding SF MBS and HMBS that the Issuer is subservicing on behalf of another approved Ginnie Mae Issuer. Issuers with a Ginnie Mae Single-Family Servicing Portfolio that exceeds $50 billion in UPB will be required to obtain credit ratings in addition to the external primary servicer rating. Both, the primary servicing rating and credit rating requirements are detailed in Chapter 3 of the MBS Guide.
Revised Financial Requirements for Applicants and Issuers
Ginnie Mae is amending Chapter 2 and Chapter 3 of the MBS Guide to change the manner in which liquidity and net worth are calculated. Effective immediately, new applicants will be permitted to satisfy minimum liquidity requirements using a combination of AAA rated government securities that are marked to market in addition to cash and certain cash equivalents. However, new applicants will no longer be permitted to include deferred tax assets when computing the minimum net worth required for participation in the MBS Program. For approved Issuers, these changes will become effective for fiscal year 2020. Ginnie Mae will take into account these changes when evaluating an Issuer’s compliance with Ginnie Mae’s liquidity, net worth and capital requirements as part of the review of the Issuer’s audited financial statements and documents covering fiscal year 2020.
Moreover, Ginnie Mae is exempting Issuers that participate exclusively in the HMBS program from the leverage ratio requirements in cases where Ginnie Mae, in its sole discretion, determines that the HMBS Issuer’s failure to meet the requisite leverage ratio test is directly attributable to a demonstrated lack of true sale accounting treatment in the HMBS Program. This exemption for HMBS Issuers has been incorporated into Chapter 3, Part 8, § C of the MBS Guide, and is effective September 1, 2019.
Secured Debt Ratio as a Risk Factor
Effective September 1, 2019, Ginnie Mae is amending Chapter 3, Part 21 § B to prescribe that Issuers with secured debt to gross tangible asset ratios greater than sixty percent (60%), as described in the Guide, may, at Ginnie Mae’s sole discretion, be subject to additional financial and operational requirements prior to receiving approval for various transactions within the MBS Program, including, but not limited to requests for commitment authority and approval of Transfers of Issuer Responsibility.
Risk Factors Applied to the Approval of Transfers of Issuer Responsibility
Effective September 1, 2019, Ginnie Mae is updating Chapter 21 to inform Issuers about various risk factors that Ginnie Mae currently evaluates when assessing requests for Transfers of Issuer Responsibility, including an evaluation of whether a given approval would lead to a degree of concentration of Issuer responsibility that may pose a substantial risk to the overall integrity and soundness of the MBS Program.
Risk Factors applied to the Approval Issuer-Subservicer Agreements
Ginnie Mae, in its sole discretion, may grant or withhold approval of Issuer-Subservicer arrangements. Effective September 1, 2019, Ginnie Mae is amending Chapter 4, Part 3 of the MBS Guide to inform Issuers that it will assess the percentage of the outstanding Ginnie Mae MBS or HMBS portfolio being subserviced by any entity involved in the transaction as a factor when evaluating Issuer requests for approval of subservicing arrangements.
Revised Demonstrated Participation Requirements
Ginnie Mae dedicates significant resources to monitoring the performance of its Issuers and seeking to ensure the active and successful participation of each Issuer. Ginnie Mae grants Issuers an 18-month period to perform a qualified activity in the MBS Program. Entities that do not perform any qualified activities within that prescribed period risk losing their status as approved Issuers. Ginnie Mae is revising Chapter 3, Part 21 § A to require all Issuers to perform at least one qualified activity within a consecutive 12-month period in order to maintain their approved Issuer status and to eliminate the blanket exemption for state housing finance agencies from these requirements. The revised Demonstrated Participation Requirements have been incorporated to Chapter 3, Part 21 § A of the MBS Guide and will be effective September 1, 2020.
Revised Custodial Bank Rating Requirements
Ginnie Mae is updating the rating requirements applicable to funds custodians to align with industry standards. These revisions have been incorporated into Chapter 16, Part 8 and are effective September 1, 2019.
If you have any questions regarding this announcement, please contact your Account Executive in the Office of Issuer and Portfolio Management directly, or at (202) 708-1535.
|8/1/2019 - APM 19-05|
On July 25, 2019, the President of the United States signed into law the Protecting Affordable Mortgages for Veterans Act of 2019, which revises the loan seasoning requirements and Ginnie Mae statutory changes prescribed by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018. Ginnie Mae published APM 18-04 to implement the seasoning requirements prescribed by the 2018 Act as part of a series of pooling restrictions to disincentivize practices that result in unduly rapid prepayments in Ginnie Mae mortgage-backed securities and to ensure the strength and liquidity of the MBS Program.
Since the publication of APM 18-04, Ginnie Mae has collected industry feedback to explore additional MBS program requirements that may have a positive impact on the performance of Ginnie Mae securities, and thereby benefit the borrowers participating in the federal housing programs we support. In order to advance these objectives and implement the Protecting Affordable Mortgages for Veterans Act of 2019, Ginnie Mae hereby announces changes to the pooling eligibility requirements applicable to all VA-guaranteed refinance loans and new pooling criteria for certain cash-out refinances with loan-to-value ratios exceeding 90 percent.
Revised Seasoning Requirements
Ginnie Mae is revising the seasoning requirements in Chapter 24, Part 2 §(A)(3)(d)(i) to ensure that the requisite seasoning period is computed by reference to the first payment due date on each covered loan rather than by reference to the date on which the first payment is made. Effective with mortgage-backed securities guaranteed on or after August 1, 2019, a refinance loan insured or guaranteed under the United States Department of Veteran Affairs benefit program in chapter 37 of title 38 of the United States Code is eligible for Ginnie Mae securities only if it meets the following condition:
The note date of the refinance loan must be on, or after, the later of:
(1) the date on which the borrower has made at least six monthly payments on the loan being refinanced; and
(2) the date that is 210 days after the first payment due date of the loan being refinanced
Exemption from Seasoning Requirements for Re-Performing Refinance Loans and Permanent Financing Construction Loans
Effective with mortgage-backed securities guaranteed on or after August 1, 2019, Re-Performing Refinance Loans and Permanent Financing Construction Loans—as defined in APM 19-03, are exempt from the seasoning requirements in Chapter 24, Part 2 §(A)(3)(d)(i).
Additional Pooling Restrictions for High LTV VA Cash-Out Refinance Loans
For purposes of this new requirement, the term “High LTV VA Cash-Out Refinance Loan” means a Refinance Loan that is insured or guaranteed under the provisions of chapter 37 of title 38 of the United States Code with a loan-to-value ratio that exceeds 90 percent at the time of origination (i.e. 90.01 LTV and higher), and where the borrower converts any amount of home equity into cash.
Effective with mortgage-backed securities guaranteed on or after November 1, 2019, High LTV VA Cash-Out Refinance Loans are ineligible for Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools, except in cases when the loans are Permanent Financing Construction Loans, as defined in Chapter 24 of the MBS Guide.
High LTV VA Cash-Out Refinances may be pooled into Ginnie Mae II Custom Pools without restriction, provided they satisfy the seasoning and number of payment requirements detailed in Chapter 24, Part 2 § (A)(3)(d).
Chapter 24 of the MBS Guide has been amended effective immediately in accordance with this memorandum. If you have any questions regarding this announcement, please contact your Account Executive in the Office of Issuer and Portfolio Management directly, or at (202) 708-1535.
|6/13/2019 - APM 19-04|
As part of a multi-phase effort to implement a new formatting structure for the MBS Guide, Ginnie Mae is hereby announcing updates to the numbering convention used to identify the headers and clauses in all 35 MBS Guide chapters. Please note that no substantive policy changes are being implemented by this revision.
Effective immediately, each MBS Guide chapter will reflect the following convention to identify the level of each of its clauses. Chapter sections will be identified first by Chapter number, followed by a “Part”, then followed by a section number, and followed by subsequent, consistent alphabetical and romanette letters. For example, a citation to a subpart of Chapter 24 would read “Chapter 24, Part 2, Section A(1)(c)(i)”.
In connection with this update, the PDF version of each chapter published on our website will reflect two additional changes. First, a new outline format that is different from the two-column format that was previously used, and second, red text under each part or section, as may be applicable, will indicate the effective date of the various clauses.
For your reference and convenience, we have included a pdf file containing the previous version of all 35 chapters as well as an excel file containing a few examples that map citations in the previous version of the Guide to the new citation format. Both of these documents appear on our website as attachments to this memorandum.
Please contact your account executive directly with any questions.
|3/29/2019 - APM 19-03|
Over the past few months, Ginnie Mae has received numerous inquiries concerning the application of APM 18-04 to a variety of loan refinancing scenarios. Effective immediately, we are amending the MBS Guide in accordance with this memorandum to aid Issuers in their compliance with APM 18-04 requirements.
New Defined Terms
To illustrate the various scenarios that implicate the requirements in APM 18-04, Ginnie Mae is adding the following definitions to Chapter 24 of the MBS Guide.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii), the term “Refinance Loan” means a loan secured by an interest in real property that is a refinancing made to pay off or satisfy one or more outstanding loans, debts, or liens associated with the corresponding real property.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii) by Ginnie Mae, the term “Loan Refinancing a Mortgage Without a VA Guaranty” means a Refinance Loan that is made to pay off a mortgage loan that is not insured or guaranteed under chapter 37 of title 38 of the United States Code, including but not limited to Refinance Loans made to pay off conventional mortgage loans, Refinance Loans made to pay off mortgage loans insured by the Federal Housing Administration, and Refinance Loans made to pay off mortgage loans insured or guaranteed under USDA’s Rural Development Program.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii), the term “Loan Refinancing Non-Mortgage Debts” means a Refinance Loan that is made to pay off or satisfy a lien placed on the corresponding secured property other than a lien associated with a previous mortgage loan, including but not limited to tax, judgment, and mechanic’s liens.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii), the term “Loan Refinancing a Mortgage Without Scheduled Monthly Payments” means a Refinance Loan that is made to pay off or satisfy an outstanding mortgage that provides, by its own terms, for no monthly payments.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii), the term “Permanent Financing Construction Loan” means a loan used to provide permanent financing for a newly-constructed or renovated Single-family home and to satisfy an existing lien against such a home resulting from the corresponding construction or renovation project.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii), the Term “Re-Performing Refinance Loan” means a Refinance Loan that is not more than 30 days delinquent, that was previously bought out from a pool or loan package backing a Ginnie Mae MBS, and that retains the same rate and terms as the rate and terms associated with such loan on the date the loan was initially securitized in a Ginnie MBS.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii), the term “Modified Loan” means a mortgage loan that has undergone a rate and/or term modification pursuant to a duly executed loan modification agreement.
General Applicability of APM 18-04 Requirements
APM 18-04 required the note date of any VA-guaranteed Refinance Loan to be on or after the later of: a) the date that is 210 days after the date on which the first monthly payment was made on the mortgage being refinanced and b) the date on which 6 full monthly payments have been made on the mortgage being refinanced (“Seasoning Requirements”). Except as provided below, any VA-guaranteed Refinance Loan that is used to pay off another mortgage loan must meet these Seasoning Requirements to be eligible collateral for a Ginnie Mae MBS.
Loans Refinancing Mortgages Without a VA Guaranty
The Seasoning Requirements were derived from Section 309(b) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155/P.L 115-174) (the Act). Section 309(b) of the Act does not carve out any exceptions for VA-guaranteed Refinance Loans used to pay off mortgages that are not guaranteed by the VA. Hence, any VA-guaranteed Loan Refinancing a Mortgage Without a VA Guaranty, including a Refinance Loan used to pay off a conventional mortgage, is subject to the Seasoning Requirements in APM 18-04.
Re-Performing Refinance Loans
The restrictions imposed by the Act apply to Ginnie Mae single-class Mortgage-Backed Securities issued after the date the Act was enacted. Hence, the determination of whether the Seasoning Requirements in APM 18-04 apply to a given VA-guaranteed Refinance Loan depends on the issuance date of the corresponding MBS, not on any loan transaction date. For this reason, any VA-guaranteed Refinance Loan that is re- delivered to Ginnie Mae without modification must satisfy the requirements of APM 18-04 to be eligible for pooling and securitization, even if they were previously pooled. In short, any VA-guaranteed Re-Performing Refinance Loans submitted for June 2018 issuances or later must comply with the Seasoning Requirements in APM 18-04.
The requirements of APM 18-04 apply exclusively to Refinance Loans guaranteed under the VA Loan Guaranty Program. Any loans subject to rate and/or term changes resulting from the execution of a loan modification agreement have a separate and distinct loan purpose from a Refinance Loan, and are therefore treated differently, even when the loan being modified is a Refinance Loan. Consequently, Modified Loans are not subject to Seasoning Requirement in APM 18-04.
Loans Refinancing Non-Mortgage Debt
As noted earlier, the restrictions in APM 18-04 stem from Section 309(b) of the Act. Section 309(b) states explicitly that its restrictions apply when refinancing a “mortgage.” Those restrictions do not extend to refinances of other types of liens. Thus, a VA-guaranteed Loan Refinancing Non-Mortgage Debt is not subject to the Seasoning Requirements in APM 18-04.
Loans Refinancing Mortgages Without Scheduled Monthly Payments
Refinance Loans made to pay off mortgages that provide for no monthly payments are outside the scope of the prohibitions in Section 309(b), which provides for the requisite seasoning to be computed by reference to the date corresponding to “full monthly payments.” Hence, a Loan Refinancing a Mortgage Without Scheduled Monthly Payments, including for example a Refinance Loan used to pay off a reverse mortgage for which no monthly payments are scheduled, is not subject to the Seasoning Requirements in APM 18-04.
Permanent Financing Construction Loan
Permanent Financing Construction Loans may or may not be subject to the Seasoning Requirements depending on the circumstances. In cases where the permanent financing is guaranteed under VA’s Loan Guaranty Program as a “refinancing”, Ginnie Mae will require compliance with APM 18-04. On the other hand, if the loan is structured and guaranteed under VA’s Loan Guaranty Program as a “purchase”, then it will not be subject to the seasoning requirements of APM 18-04. Ginnie Mae requires Issuers to follow the loan guaranty policies and requirements promulgated by the VA, and to identify the attributes of each loan delivered to Ginnie Mae in a manner that is consistent with those policies and requirements as well as Ginnie Mae’s requirements.
Please note however, that similar to Loans Refinancing Mortgages Without Scheduled Monthly Payments, certain Permanent Financing Construction Loans may be exempt from the Seasoning Requirements when the loan associated with the mortgage that is being refinanced does not, by its own terms, provide for a minimum of six-monthly payments. For example, a Refinance Loan that is used to pay off a construction loan with terms that provide for interest only payments during the first four months followed by a fifth payment covering the full balance of the construction loan would not be subject to the Requirements of APM 18-04.
Ginnie Mae expects all Issuers to implement processes and quality controls to ensure that any VA-guaranteed refinance delivered to Ginnie Mae for securitization complies with the Seasoning Requirements. Issuers should consult with their internal legal, compliance, and risk teams to identify and implement any necessary and additional underwriting, quality control processes or documentation requirements. If an Issuer cannot precisely calculate the seasoning of the mortgage being refinanced, then it should not pool the loan. Any Issuer that has pooled VA-guaranteed Refinance Loans that are, subject to, but not compliant with the Seasoning Requirements must process the corresponding buyouts immediately.
For questions regarding this announcement, please contact your Account Executive in the Office of Issuer and Portfolio Management directly or at (202) 708-1535.
|3/7/2019 - APM 19-02|
Ginnie Mae requires Issuers to engage in practices that are consistent with its mission and the integrity of the Mortgage-Backed Securities (MBS) Program. The amount of net servicing income generated by each Issuer portfolio is a key factor impacting that Issuer’s ability to remit scheduled payments to security holders. Currently, Issuers can create Ginnie Mae pools or loan packages that yield servicing spreads ranging from 19 to 69 basis points (bps). Issuer pooling practices that result in overall portfolios with servicing spreads that fall on the lower end of the possible range may not generate sufficient amounts of servicing income to withstand periods of financial stress, and therefore may have an adverse impact on the stability of the MBS Program. As part of a series of counterparty risk management policy updates, Ginnie Mae is implementing the following requirement:
New Minimum Portfolio Servicing Spread Requirement
Effective March 1, 2020 (Effective Date), Issuers will be required to have, and maintain at all times, a weighted average servicing spread of at least 25 bps for their Ginnie Mae portfolio comprised of forward, fixed-rate, Single-Family loans (Minimum Portfolio Servicing Spread). Please note that this general requirement applies at the portfolio level, not at the pool or loan package level. Issuers may continue to create Ginnie Mae pools and loan packages that yield servicing spreads within the ranges permissible under Section 24-2(A)(1)(c) of the MBS Guide so long as the Issuer’s overall portfolio servicing spread does not fall below the required minimum. For reference, the average servicing spread of all Single-Family Ginnie Mae ll pools and loan packages is approximately 36.7 bps. If weighted by unpaid principal balance, the average servicing spread of the same is approximately 35 bps.
Effect on Transactions that Pledge or Encumber Servicing Income
Subject to the limitations outlined in Chapter 21 of the MBS Guide, Issuers may continue to execute transactions that pledge or otherwise encumber their Servicing Income or servicing rights. Any amount of Servicing Income or servicing rights that is pledged or encumbered in accordance with Chapter 21 of this Guide will not be excluded from the computation of the Minimum Portfolio Servicing Spread required by this Subsection 3-21(C).
Effect of Non-Compliance
Any Issuer that does not have Minimum Portfolio Servicing Spread of at least 25 bps by the Effective Date may be subject to additional requirements, which could include, but are not limited to, restrictions on pools or loan packages with servicing spreads that are lower than the Minimum Portfolio Servicing Spread, or other minimum servicing spread determined by Ginnie Mae at its sole discretion. Ginnie Mae will notify in writing any Issuers at risk of non-compliance ahead of the Effective Date.
Chapter 3 of the MBS Guide is modified effective immediately to incorporate new subsection 3-21(C) Minimum Portfolio Servicing Spread Requirements, which contains additional details, as well as the definitions and formulas pertaining to this announcement. Please contact your Account Executive directly with any questions or concerns.