Enjoy access to a free NMLS renewal class when you attend an in-person event.
Ginnie Mae has announced several new Issuer requirement changes, as well as a new Issuer scorecard as part of a larger strategic effort to appropriately manage risk and resources within an evolving housing finance market. Ginnie Mae President Ted Tozer said that the changes are part of an overall effort to ensure that Ginnie Mae’s Mortgage-Backed Securities (MBS) guarantee program continues to be flexible and available to as many entities as possible.
“The market is changing rapidly in terms of the types of Issuers and counterparties that Ginnie Mae is dealing with. We have an obligation to be diligent in monitoring risk and ensure that our Issuers are successful. But we also want to attract global capital into the mortgage market and ensure that our model is flexible and available and able to attract capital into the market, which will provide access to credit to all qualified borrowers. Both the new Issuer net worth and liquidity requirement and the demonstrated participation requirement support Ginnie Mae’s continued efforts to effectively monitor risk and appropriately evaluate the financial strength, performance and stability of Issuers,” said Tozer. “These new requirements, along with the expertise of our staff, will ensure the success of our Issuers, allow Ginnie Mae to continue protecting American taxpayers from market volatility, while attracting capital into the mortgage market and providing further stability to the U.S. housing industry.”
Ginnie Mae announcements include:
Issuer Operational Performance Profile (IOPP)
The IOPP is essentially a “scorecard” that will:
►Enable Issuers to better understand and comply with Ginnie Mae expectations;
►Provide Issuers with a framework and methodology from which they can gauge their effectiveness against a pre-determined set of Ginnie Mae expectations (metrics) as well as how they rank against their peers.
Issuers will be scored monthly, based on a series of formulae. Applying weighting algorithms and in some cases, adjusting for certain control factors, each issuer will be rated against a pre-defined peer group. The end result will be two scores—one for operational management and one for delinquency management.
New Issuer Net Worth and Liquidity Requirements
The modification adjusts minimum adjusted net worth and liquid asset requirements for Single-Family Issuers and Issuers participating in more than one MBS program. The new requirements include:
►Single-Family Issuer Minimum Net Worth: Single-Family Issuers’ minimum adjusted net worth requirement of $2,500,000 plus 0.20 percent (20 basis points) of the Issuer's total effective outstanding Single-Family obligations will be increased to $2,500,000 plus 0.35 percent (35 basis points) of the Issuer's total effective outstanding Single-Family obligations.
►Single-Family Issuer Minimum Liquidity: Single-Family Issuers’ minimum liquid assets requirement of 20 percent of required net worth will be changed to the greater of $1 million or 0.10 percent (10 basis points) of the Issuer's outstanding Single-Family securities.
►Issuers Approved for More Than One Program Minimum Net Worth and Liquidity: Issuers who are approved to participate in more than one program type (Single-Family, Multifamily, Manufactured Home, and/or HECM MBS) will have to meet a minimum adjusted net worth and liquid assets requirement equal to or greater than the sum of the minimum requirements for all the program types in which the Issuer is approved to participate, as opposed to the highest program requirement.
“Since our inception, Ginnie Mae has provided stability to the U.S. housing finance system, particularly during times of economic stress,” said President Tozer. “We want to do everything possible to ensure that issuers who enter the MBS program are successful and can continue to be successful.”
Applicants seeking Issuer approval will be required to meet these new requirements beginning on Jan. 1, 2015. Additional new requirement effective dates include:
►Issuers approved on or before Dec. 31, 2014 will be required to meet the new requirements beginning Dec. 31, 2015.
►Beginning Jan. 1, 2015, in order for a mortgage-servicing rights (MSRs) bulk transfer, or “a transfer of Issuer responsibilities,” to be approved by Ginnie Mae, the acquiring Issuer will have to meet the new requirements.
►Beginning Jan. 1, 2015, in order for a new Pool Issuance for Immediate Transfer (PIIT), or MSR flow transfer, arrangement to be approved by Ginnie Mae, the acquiring Issuer will have to meet the new requirements.
Ginnie Mae expects that Issuers will actively participate in the program by issuing, acquiring issuer responsibility for, or subservicing Ginnie Mae MBS. However, the number of Issuers, particularly newly approved Issuers, who fail to do so, is rising. Ginnie Mae expends significant resources in the review, analysis and compliance monitoring of applicants and approved Issuers. Additionally, long-term lack of participation calls into question whether an Issuer continues to possess the operational capability to service Ginnie Mae MBS. Therefore, Ginnie Mae may withdraw Issuer’s program approval if it has not participated in the above activities in the preceding 18 months, or if a newly approved Issuer has not begun to participate within 18 months of approval.
Effective Jan. 1, 2015, Issuers must demonstrate participation by issuing, acquiring, or subservicing MBS in the program(s) for which they are approved in the preceding 18 months. Issuers approved after July 1, 2013 must demonstrate participation within 18 months of their approval date. An Issuer that fails to demonstrate compliance with this requirement may either voluntarily withdraw from the program or request an extension of time in order to comply with the requirement.
“As part of our risk management efforts, Ginnie Mae devotes a significant amount of time and energy to the review and analysis of applications for Issuer approval,” said Tozer. “Our new demonstrated participation requirements will ensure that we are able to continue practicing strong financial discipline by deploying our resources effectively.”