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Ginnie Mae Sees First Extended Term Securitizations Hit the Secondary Market

Every sector of the U.S. economy has been affected by the declaration of a national health emergency in early 2020, due to the COVID-19 pandemic spreading across the country. The economic impacts of the pandemic rippled into all sectors, and government mortgage insurers and guarantors played a key role in creating new loan options to help homeowners who fell behind and entered forbearance plans allowed by the CARES Act (2020). In July 2021, the Biden Administration released​ ​the comprehensive response of the government, and Ginnie Mae had a significant role to play in those efforts, as provider of the only full government guarantee on mortgage-backed securities (MBS).

Ginnie Mae immediately delivered on its commitment to maintain a strong and liquid secondary market for government mortgage loans, in support of our mission to create and sustain affordable homeownership opportunities. Ginnie Mae did so through the development of an extended term MBS product designed specifically for our Issuer community. The extended term program enhancement essentially serves as an opportunity to help eligible homeowners pursue loan modifications beyond standard 30-year loan terms, allowing for deeper payment reduction under the modified terms.

Ginnie Mae worked closely with our government insuring and guaranteeing partners to develop the extended ​term (ET) Ginnie Mae MBS. Through these collaborative efforts, our agency partners can now work with loan servicers and eligible borrowers to offer a mortgage loan modification with terms beyond thirty years. And as Ginnie Mae Issuers, these loans can then be pooled into a new custom security for issuance in the secondary capital markets. What distinguishes the extended term loan from other government guaranteed and insured home loans is the borrower’s repayment schedule: homeowners exiting CAREs Act forbearance plans may be eligible to lower their monthly mortgage payments through a loan modification that can exceed 360 months and up to 480 months, as needed. Extending the term for loan repayment enables borrowers to realize the benefit of lower monthly mortgage payments, allowing them to safely and affordably stay in their homes. Ginnie Mae Issuers may then pool these modified, extended term loans into a new custom pool type created specifically for the extended term collateral.

Ginnie Mae is pleased to announce that the first Custom extended term (ET) securitizations occurred in December 2021, and all signs point to more volume in the coming months, as the Federal Housing Administration (FHA) plans updates to its own loss mitigation program to allow for longer term loan modifications and more affordable monthly payments. These initial securitizations have provided a vital lifeline to those borrowers who might not otherwise qualify for a standard loan modification. Through the extended term loan modification program, Ginnie Mae and our agency partners have been able to aid veterans and rural households with VA and USDA loans, through extended repayment schedules. And Ginnie Mae looks forward to working alongside FHA as they make plans to introduce an extended term loan program as well.

Meeting market challenges in support of affordable homeownership and rental opportunities is our daily work at Ginnie Mae. And this work is incredibly timely, as mortgage interest rates begin to rise, and our Issuers and agency partners seek additional tools to help borrowers achieve affordable homeownership, the hallmark of the Ginnie Mae mission. Ginnie Mae is pleased to work collaboratively with our agency partners to offer loan modification options that can then be pooled into mortgage-backed securities offered in the global capital markets.