Ginnie Mae is focused on ensuring our Issuers can remain strong throughout economic cycles. Our Issuers are our direct counterparties and are on the frontlines of our mortgage-backed securities (MBS) program. It is paramount, therefore, that the market and individual issuers remain resilient. In addition to working closely with our Issuers to monitor risks and address other needs, Ginnie Mae also makes updates to its program requirements to promote resilience and stability in the housing finance system. On August 17, 2022, Ginnie Mae announced new financial eligibility requirements for single-family applicants and Issuers of its MBS program.
Most of the new requirements will become effective on September 30, 2023:
Our monitoring of Issuer performance against these metrics suggests that an overwhelming majority of Issuers will be in compliance with the new requirements.
In addition, effective December 31, 2023, single-family Issuers and Applicants that originated more than $1 Billion in UPB in the most recent four-quarter period must have liquidity greater than $1mm or the sum of the items listed above as well as 50 basis points of Loans Held for Sale and 50 basis points of the UPB of Interest Rate Lock Commitments (IRLCs) after fallout adjustments. Ginnie Mae has also introduced Risk Based Capital requirements for certain single-family Issuers, which will go into effect December 31, 2024 (APM 22-11).
Although significant steps have been taken in the nation’s economic recovery, we are still in the midst of a challenging market cycle with high interest and mortgage rates, liquidity constraints, and instability in some sectors of the financial services sector. The mortgage market has also shifted over the last decade as non-depository mortgage institutions have come to represent the majority of originations and servicing for Ginnie Mae and the GSEs. These enhanced eligibility standards were developed to strengthen our Issuers and the secondary mortgage market overall and, ultimately, to further secure and expand the ability of Ginnie Mae and our partner agencies to continue serving borrowers and meeting obligations to investors. The financial health of our Issuers also strengthens their ability to attain financing from creditors, which makes our Issuers more sustainable and resilient, allows them to provide more sustainable access to credit for borrowers, and supports their capacity to modify mortgages for struggling homeowners.
For more information on the upcoming capital and liquidity requirements, please refer to All Participant Memorandum (APM) 22-09.