Since it was founded, Ginnie Mae has strived to be a model for effective governmental involvement in a sizable, complex, market-oriented segment of the economy. The events of 2020 presented us with new and unique challenges in executing on this goal as the country confronted a pandemic that still disrupts nearly every aspect of life.
Our strategic response to the COVID-19 pandemic, and government policy response, was intended to support the relief efforts while preserving market confidence in the security and honoring the overarching imperative that MBS investors be assured of timely and full payment. To do so, we implemented a number of changes to our internal and external-facing initiatives. The internal changes aimed to increase the efficiency and effectiveness of our business processes, even if only temporarily, as a means to free up the resources needed to deploy a suite of pandemic-related programs.
The suite of external-facing initiatives included MBS Program updates designed to meet the needs of the moment while balancing the interests of stakeholders, and included updates that:
1 enable greater use of digital assets and electronic transactions to minimize business disruptions associated with public health guidelines (i.e., APM 20-01 Temporary Use of Digital Signatures on form HUD 11711A and form HUD 11711B, APM 20-04 Servicemembers Civil Relief Act (SCRA) Process Improvements, APM 20-10 Digital Collateral Program Launch, APM 20-11 MyGinnieMae Guide Updates);
2 safeguard liquidity as well as the safety and soundness of the government-backed mortgage secondary market segment (i.e., APM 20-03, APM 20-05, APM 20-07, APM 20-16, and APM 20-19);
3 provide MBS Program participants with temporary or limited flexibilities as to reduce compliance and regulatory burdens (i.e., APM 20-02, APM 20-06, APM 20-14 Alternative Procedures Permitted for Certain Aspects of Issuer Annual Audit Report for Fiscal Year 2020; APM 20-17, APM 20-18); and
4 support and foster alignment in federal and industry-wide initiatives (i.e., APM 20-12, APM 20-13).
We recognize that the task of navigating through the COVID-19 pandemic is not yet complete, but the new year provides an opportunity to begin shifting our focus to what must occur next. The MBS Program initiatives implemented this year are different both in degree and in kind from those that were implemented in the past, and as a whole could not be sustained in perpetuity in their present form without detriment to the overall program. As a result, Ginnie Mae expects to amend or retire many of the temporary programs put in place in 2020, and renew its focus on our previously published strategic agenda.
Two principles will guide Ginnie Mae in this process. The first is that programs put in place to combat the effects of the pandemic and the government response to it were never designed to be permanent. Of course, Ginnie Mae will continue to support initiatives deployed in 2020 which were always going to be implemented but were altered or accelerated due to the pandemic, such as those associated with digitalization efforts. But a number of initiatives will necessarily sunset. This includes, for example, the extraordinary relief programs necessitated by the increases in borrower forbearance volumes such as the Pass-Through Assistance Programs and the Temporary Relief from the Acceptable Delinquency Threshold Requirements, which are set to expire and will not be necessary once affected borrowers find a permanent loan resolution option. The second is that changing economic conditions may require Ginnie Mae to continue, alter, or expand some of these temporary programs – though it should be understood that Ginnie Mae does not anticipate doing so absent elevated delinquencies or other adverse economic developments.
Part of the task ahead is clearly articulating to program participants which initiatives will be retained, which will be amended, and which will be allowed to expire. For this effort, we intend to collaborate with all stakeholders and leverage the lessons and leading practices acquired during the recent trials. We look forward to the new year and the collective work we’ll be undertaking with our governmental and commercial partners.
The COVID-19 National Emergency, and the necessary public health responses to it, have taken a tremendous toll on our nation’s economy. Ginnie Mae has taken several steps in recent weeks to help counteract this and maintain stability and liquidity in the government insured mortgage-backed securities (MBS) market. These steps have enabled Issuers and mortgage servicers to provide the financial flexibility that millions of homeowners and renters needed, while maintaining broad-based market confidence.
The enhancement of the Pass-Through Assistance Program (PTAP), announced in early April received the most attention from the industry. This enhanced program, known as PTAP/C19 provides a financial facility for Issuers that are experiencing a temporary liquidity shortfall as they manage mortgage borrower forbearance programs. In early May, Ginnie Mae broadened the program to Issuers of Multifamily MBS. Both program components are open to all qualifying Issuers and are designed to be used when all other financial options available to Issuers have been exhausted. Unlike prior pass-through assistance programs, applying for or receiving PTAP/C19 assistance is not considered an event of default in the Ginnie Mae program. We made this change because of the severity and wide-spread economic impact of the COVID-19 National Emergency.
As Ginnie Mae moved quickly to develop the PTAP/C19 program to help mitigate both the anticipated and unknown effects of mortgage forbearance programs on Issuer liquidity, our strategy included providing regular updates on program usage. We began publishing usage and related information on our website in April.
Almost from the start of the National Emergency, many industry observers forecast tremendous strains on Issuer/servicer liquidity, especially in the non-bank sector. Thankfully, Ginnie Mae was prepared for this heightened risk. Over the past few years, we have modernized existing proprietary tools and incorporated new methods to monitor Issuer liquidity and overall financial health. At the same time, the agency is working on further enhancing its Acknowledgement Agreement to afford Issuers more financial flexibility with respect to Ginnie Mae servicing rights and required issuer advances, including innovations intended to attract new types of investors to the Ginnie Mae market.
Along with providing a liquidity facility for Issuers, Ginnie Mae took steps to ensure that reporting of delinquent loans because of forbearance would not negatively affect an Issuer’s standing with the agency, as would normally occur when delinquency levels spike. On May 14 Ginnie Mae established new guidance through APM 20-06 for Issuers reporting delinquent mortgage loans to Ginnie Mae that provides temporary relief from sanction related to the delinquency threshold requirement.
These MBS program enhancements have helped to keep the government mortgage market operating efficiently, reduce risk to taxpayers, and allow Issuers to focus on meeting the mortgage needs of their customers, all while maintaining Ginnie Mae’s commitment to its investors that scheduled principal and interest will be paid on time and in full.
As the mortgage market response to the COVID-19 National Emergency evolves, Issuers and other stakeholders can rest assured that Ginnie Mae will continue to safeguard the stability and safety in the government-insured mortgage market while minimizing risk to taxpayers.