WASHINGTON, DC – Ginnie Mae today announced plans to undertake a thorough update of the program requirements and infrastructure relating to the loan documents that serve as collateral for securitized pools of loans. Michael Drayne, Ginnie Mae’s senior vice president of Issuer and Portfolio Management, said the government corporation will use four “guiding principles” as it undertakes a comprehensive review and reform of the policies and procedures relating to the management of pool collateral via third party document custodians.
Drayne said the need for reform became apparent as a result of the after-effects of the financial crisis and the unprecedented level of Mortgage Servicing Rights (MSR) transfer requests in recent years. “Every one of the nine million loans in Ginnie Mae pools is secured by a collateral loan file. As our business has grown, and the ownership of so many of the underlying MSRs has changed hands since the financial crisis, it has become even more critical to ensure that our program for managing this documentation evolves to meet changing circumstances and take advantage of technological progress.”
Drayne said Ginnie Mae plans to engage issuers, document custodians and other stakeholders in a dialogue about how to most effectively update the program requirements and infrastructure relating to pool collateral. “We plan to take a thoughtful approach and expect that this will be a multi-year effort,” said Drayne.
As a starting point, Ginnie Mae has established four “guiding principles” to reflect area that it believes should be addressed in any comprehensive reform effort:
1) Policy: Current policies will be re-examined to consider whether they adequately reflect and mitigate actual risks and the current and foreseeable state of available technology.
2) Integration: Document custody functions and information should be more closely integrated into Ginnie Mae’s systems.
3) Loan Level: Information about the status of pool collateral should be managed at the loan level, not merely the pool level.
4) Enforcement: The methods by which Ginnie Mae enforces compliance with its policies will be re-examined and harmonized with its broader practices for managing issuer relations.
Current requirements for issuers to review their document custodians are detailed in the Document Custody Manual (Appendix V-1) of Ginnie Mae’s Mortgage Backed Securities Guide 5500.3, Rev. 1, found on www.ginniemae.gov.
About Ginnie Mae
Ginnie Mae is a wholly-owned government corporation within the U.S. Department of Housing and Urban Development. Ginnie Mae pioneered the MBS, guaranteeing the very first security in 1970 and raises capital from investors in the global credit markets to ensure liquidity for affordable rental and homeownership opportunities across the country. Through its MBS, Ginnie Mae finances housing mortgage insurance programs run by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the Office of Public and Indian Housing (PIH), and the Department of Agriculture’s Rural Housing Service. Ginnie Mae securities carry the full faith and credit of the United States Government.