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:
- Revised net worth requirements.
- Currently, the minimum base net worth requirement for SF Applicants is $2.5 million, and for SF Issuers, it is $2.5MM plus 35 basis points of Ginnie Mae single-family outstanding obligations.
- The requirements have been revised for both SF Issuers and Applicants to also include 25 basis points of Government Sponsored Enterprise (GSE, i.e., Fannie Mae and Freddie Mac) single-family servicing portfolio and 25 basis points of non-agency (i.e., non-government, non-GSE) single-family servicing portfolio in addition to the current requirements.
- Revised liquidity requirements.
- Eligible Assets: The list of liquid assets eligible to meet Ginnie Mae’s requirements were expanded to include GSE obligations, GSE MBS, and certain advances.
- Required Liquidity: Currently, SF Applicants are required to have liquid assets of at least $1MM, and SF Issuers are required to have liquid assets the greater of $1MM or 10 basis points of outstanding Ginnie Mae single-family servicing unpaid principal balance (UPB).
- Under the new requirements, SF Applicants are now required to have liquid assets equal to the greater of at least $1MM or the sum of 3.5 basis points of GSE single-family servicing UPB (actual/actual), 7 basis points of GSE single-family UPB (scheduled/scheduled or scheduled/actual), and 3.5 basis points of outstanding non-agency UPB.
- SF Issuers are required to have liquid assets equal to the greater of $1MM or the sum of 10 basis points of Ginnie Mae single-family MBS UPB plus 3.5 basis points of GSE single-family UPB (actual/actual), 7 basis points of GSE single-family UPB (scheduled/scheduled or scheduled/actual), and 3.5 basis points of outstanding non-agency single-family UPB.
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.