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Ginnie In Brief

Posts by Seth D. Appleton | View All Blog Posts
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by Seth D. Appleton | 3/27/2020

I wanted to communicate about Ginnie Mae’s efforts to address any servicer liquidity issues that might result from the COVID-19 emergency.

Under the Ginnie Mae MBS program, the approved issuers who service mortgage-backed securities (MBS) are required to remit scheduled principal and interest (P&I) to investors, and make various other payments in connection with mortgage loans, even when monthly payments are not received from borrowers. Indeed, the cornerstone of our MBS Guaranty program has been and will always be that the investors who support access to affordable mortgage credit for the U.S. Department of Housing and Urban Development (HUD), the U.S. Department of Agriculture (USDA), and the U.S. Department of Veterans Affairs (VA) borrowers by purchasing Ginnie Mae securities will receive payments of principal and interest on time and in full.

We have heard from our issuer and servicing partners that borrower forbearance arrangements that are nationwide in scope could place an enormous strain on issuers. This strain would be caused by the immediate need to advance required pass-through payments to investors, or other entities entitled to receive payments, and the later reimbursement of those advances by borrowers or the agencies who insure the loans (HUD, VA and USDA under the Ginnie Mae program).

Please know that we are taking action to address these concerns and potential liquidity challenges faced by Ginnie Mae issuers. Ginnie Mae has the authority to make changes to the requirements of our program, and we are using those powers to tailor the existing disaster pass-through assistance programs to more suitably scale to the needs of this National Emergency.

Ginnie Mae fully anticipates implementing within the next two weeks, via an All Participants Memorandum (APM), a Pass-Through Assistance Program (PTAP) through which issuers with a P&I shortfall may request that Ginnie Mae advance the difference between available funds and the scheduled payment to investors. This PTAP will be effective immediately upon publication of the APM for Single Family program issuers, with corresponding changes made to Ginnie Mae’s MBS Guide in due course. We anticipate publishing PTAP terms for HMBS (reverse mortgage) and Multifamily issuers shortly thereafter.

Under current policy, the advancing of funds by Ginnie Mae to an issuer as a result of a Major Disaster declared by the President of the United States would be a considered an event of default under our program. But, because the current National Emergency is not limited in geographic scope in the way a natural disaster is, a P&I advance by Ginnie Mae through the PTAP will not be considered an event of default, though all other program requirements will continue to apply. In return for any payments advanced under the PTAP, issuers will be required to sign an agreement with Ginnie Mae and must repay the advance within a specified time period. The agreement with Ginnie Mae will provide for extension requests and specify the rate of interest that will apply to the borrowed advances.

To be perfectly clear, borrowing under the PTAP should be a “last resort” financing option to alleviate a liquidity shortage faced by any Ginnie Mae issuers. PTAP’s purpose will be to support the forbearance and loss mitigation programs of our insuring agency partners (FHA, VA and USDA) by minimizing potential disruption in the mortgage servicing market so that those federal mortgage insurance and guarantee programs can be administered efficiently and with maximum help to borrowers. Ginnie Mae will choose to make these advances only where doing so will further the program mission and the American taxpayers who stand behind it.

As noted above, these exigent changes to Ginnie Mae’s disaster pass-through program under the PTAP will allow us to continue to honor our statutory duty to ensure the timely and full payment of P&I to Ginnie investors.

I also want to relay that the implementation of the PTAP is not the only step Ginnie Mae is taking to alleviate the effects of the National Emergency. We have recently acted to facilitate electronic execution and transmission of certain pooling documents (see APM 20-01​), and delayed submission requirement for audited financial statements from issuers (see APM 20-02). We are also expediting our digital collateral initiative, and in the near future Ginnie Mae expects to publish information about forbearance of sanctions for violation of liquidity and delinquency standards attributable to the COVID-19 crisis.

Nonetheless, while PTAP and these additional policy actions will not by themselves address the full range of potential stress on issuer cash flows and operations, market participants should be assured that Ginnie Mae is acting expeditiously and forcefully to support relief for American homeowners and meet its statutory responsibility to provide stability and liquidity in the secondary market for residential mortgages.

by Seth D. Appleton | 2/19/2020

With the housing finance system experiencing a significant evolution, it’s an exciting time to be a part of Ginnie Mae. The agency is developing new programs, processes and technology to ensure that it remains a reliable source of capital for the government mortgage loan market and the many households who depend on it. We are taking steps to ensure that it is well positioned to take on new responsibilities, if asked, as this period of change continues.

In 2019, Ginnie Mae reported more than $450 billion in MBS issuances, lifting our total outstanding MBS to nearly $2.1 trillion and providing affordable housing finance to approximately 1.8 million households. Those numbers and the impact on homeowners across the country would not have been possible without the commitment of our Issuers, servicers, investors and other stakeholders.

Already in the first month of 2020, strong MBS issuance volume in January is picking up where 2019 left off. For the past five months, Ginnie Mae MBS issuance has exceeded $50 billion — the first time that has ever happened. This is a result of the combination of mortgage rates hovering around historic lows, lenders employing new technology and improved borrower marketing strategies.

We will continue to be vigilant about monitoring market data and Issuer performance and on guard against trends that could have negative implications for the Ginnie Mae MBS program. Loan prepayments, even at rapid levels, are not inherently problematic if they clearly relate to market conditions and reflect the ability of homeowners to improve their financial situation. In order to address lending practices that have unhealthy effects, Ginnie Mae and the Department of Veterans Affairs (VA) have taken several policy actions in recent years; we are currently evaluating the impact of these steps and will consider additional steps if they seem warranted.

Our embrace of new technology, such as Robotic Process Automation and digital mortgages, signals that Ginnie Mae is changing, even as important aspects of our business remain constant. As execution of our “Ginnie Mae 2020” agenda continues throughout the year, we will improve the way users access core applications and deliver single-family pools. Ginnie Mae will also publish new e-mortgage rules related to digital collateral in our MBS Guide this year, as well as initiate an accompanying policy program test. Looking further down the road, we have started to plot the path toward the transition to loan-level program functionality that we committed to in the Housing Finance Reform Plan from the Department of Housing and Urban Development (HUD).

Our attention to risk management remains firm as well, as we continue to refine our program to model the impact of stressed economic environments on the institutions whose performances we guarantee. We are also working on establishing program requirements about resolution planning to better equip us for large-scale institutional failures

Moving into 2020, the industry can be reassured that Ginnie Mae will continue pushing forward in our mission. Not only are we listening to our Issuers, servicers and investors and keeping an eye on managing risk to taxpayers, but we’re holding true to our goal of serving American homeowners and renters by being the most efficient conduit possible for the delivery of global capital.

Last Modified: 11/26/2019 1:21 PM