|3/29/2019 - APM 19-03|
Over the past few months, Ginnie Mae has received numerous inquiries concerning the application of APM 18-04 to a variety of loan refinancing scenarios. Effective immediately, we are amending the MBS Guide in accordance with this memorandum to aid Issuers in their compliance with APM 18-04 requirements.
New Defined Terms
To illustrate the various scenarios that implicate the requirements in APM 18-04, Ginnie Mae is adding the following definitions to Chapter 24 of the MBS Guide.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii), the term “Refinance Loan” means a loan secured by an interest in real property that is a refinancing made to pay off or satisfy one or more outstanding loans, debts, or liens associated with the corresponding real property.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii) by Ginnie Mae, the term “Loan Refinancing a Mortgage Without a VA Guaranty” means a Refinance Loan that is made to pay off a mortgage loan that is not insured or guaranteed under chapter 37 of title 38 of the United States Code, including but not limited to Refinance Loans made to pay off conventional mortgage loans, Refinance Loans made to pay off mortgage loans insured by the Federal Housing Administration, and Refinance Loans made to pay off mortgage loans insured or guaranteed under USDA’s Rural Development Program.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii), the term “Loan Refinancing Non-Mortgage Debts” means a Refinance Loan that is made to pay off or satisfy a lien placed on the corresponding secured property other than a lien associated with a previous mortgage loan, including but not limited to tax, judgment, and mechanic’s liens.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii), the term “Loan Refinancing a Mortgage Without Scheduled Monthly Payments” means a Refinance Loan that is made to pay off or satisfy an outstanding mortgage that provides, by its own terms, for no monthly payments.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii), the term “Permanent Financing Construction Loan” means a loan used to provide permanent financing for a newly-constructed or renovated Single-family home and to satisfy an existing lien against such a home resulting from the corresponding construction or renovation project.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii), the Term “Re-Performing Refinance Loan” means a Refinance Loan that is not more than 30 days delinquent, that was previously bought out from a pool or loan package backing a Ginnie Mae MBS, and that retains the same rate and terms as the rate and terms associated with such loan on the date the loan was initially securitized in a Ginnie MBS.
- As used in Chapter 24-2, Section 3, Subsection (d)(ii), the term “Modified Loan” means a mortgage loan that has undergone a rate and/or term modification pursuant to a duly executed loan modification agreement.
General Applicability of APM 18-04 Requirements
APM 18-04 required the note date of any VA-guaranteed Refinance Loan to be on or after the later of: a) the date that is 210 days after the date on which the first monthly payment was made on the mortgage being refinanced and b) the date on which 6 full monthly payments have been made on the mortgage being refinanced (“Seasoning Requirements”). Except as provided below, any VA-guaranteed Refinance Loan that is used to pay off another mortgage loan must meet these Seasoning Requirements to be eligible collateral for a Ginnie Mae MBS.
Loans Refinancing Mortgages Without a VA Guaranty
The Seasoning Requirements were derived from Section 309(b) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155/P.L 115-174) (the Act). Section 309(b) of the Act does not carve out any exceptions for VA-guaranteed Refinance Loans used to pay off mortgages that are not guaranteed by the VA. Hence, any VA-guaranteed Loan Refinancing a Mortgage Without a VA Guaranty, including a Refinance Loan used to pay off a conventional mortgage, is subject to the Seasoning Requirements in APM 18-04.
Re-Performing Refinance Loans
The restrictions imposed by the Act apply to Ginnie Mae single-class Mortgage-Backed Securities issued after the date the Act was enacted. Hence, the determination of whether the Seasoning Requirements in APM 18-04 apply to a given VA-guaranteed Refinance Loan depends on the issuance date of the corresponding MBS, not on any loan transaction date. For this reason, any VA-guaranteed Refinance Loan that is re- delivered to Ginnie Mae without modification must satisfy the requirements of APM 18-04 to be eligible for pooling and securitization, even if they were previously pooled. In short, any VA-guaranteed Re-Performing Refinance Loans submitted for June 2018 issuances or later must comply with the Seasoning Requirements in APM 18-04.
The requirements of APM 18-04 apply exclusively to Refinance Loans guaranteed under the VA Loan Guaranty Program. Any loans subject to rate and/or term changes resulting from the execution of a loan modification agreement have a separate and distinct loan purpose from a Refinance Loan, and are therefore treated differently, even when the loan being modified is a Refinance Loan. Consequently, Modified Loans are not subject to Seasoning Requirement in APM 18-04.
Loans Refinancing Non-Mortgage Debt
As noted earlier, the restrictions in APM 18-04 stem from Section 309(b) of the Act. Section 309(b) states explicitly that its restrictions apply when refinancing a “mortgage.” Those restrictions do not extend to refinances of other types of liens. Thus, a VA-guaranteed Loan Refinancing Non-Mortgage Debt is not subject to the Seasoning Requirements in APM 18-04.
Loans Refinancing Mortgages Without Scheduled Monthly Payments
Refinance Loans made to pay off mortgages that provide for no monthly payments are outside the scope of the prohibitions in Section 309(b), which provides for the requisite seasoning to be computed by reference to the date corresponding to “full monthly payments.” Hence, a Loan Refinancing a Mortgage Without Scheduled Monthly Payments, including for example a Refinance Loan used to pay off a reverse mortgage for which no monthly payments are scheduled, is not subject to the Seasoning Requirements in APM 18-04.
Permanent Financing Construction Loan
Permanent Financing Construction Loans may or may not be subject to the Seasoning Requirements depending on the circumstances. In cases where the permanent financing is guaranteed under VA’s Loan Guaranty Program as a “refinancing”, Ginnie Mae will require compliance with APM 18-04. On the other hand, if the loan is structured and guaranteed under VA’s Loan Guaranty Program as a “purchase”, then it will not be subject to the seasoning requirements of APM 18-04. Ginnie Mae requires Issuers to follow the loan guaranty policies and requirements promulgated by the VA, and to identify the attributes of each loan delivered to Ginnie Mae in a manner that is consistent with those policies and requirements as well as Ginnie Mae’s requirements.
Please note however, that similar to Loans Refinancing Mortgages Without Scheduled Monthly Payments, certain Permanent Financing Construction Loans may be exempt from the Seasoning Requirements when the loan associated with the mortgage that is being refinanced does not, by its own terms, provide for a minimum of six-monthly payments. For example, a Refinance Loan that is used to pay off a construction loan with terms that provide for interest only payments during the first four months followed by a fifth payment covering the full balance of the construction loan would not be subject to the Requirements of APM 18-04.
Ginnie Mae expects all Issuers to implement processes and quality controls to ensure that any VA-guaranteed refinance delivered to Ginnie Mae for securitization complies with the Seasoning Requirements. Issuers should consult with their internal legal, compliance, and risk teams to identify and implement any necessary and additional underwriting, quality control processes or documentation requirements. If an Issuer cannot precisely calculate the seasoning of the mortgage being refinanced, then it should not pool the loan. Any Issuer that has pooled VA-guaranteed Refinance Loans that are, subject to, but not compliant with the Seasoning Requirements must process the corresponding buyouts immediately.
For questions regarding this announcement, please contact your Account Executive in the Office of Issuer and Portfolio Management directly or at (202) 708-1535.
|3/7/2019 - APM 19-02|
Ginnie Mae requires Issuers to engage in practices that are consistent with its mission and the integrity of the Mortgage-Backed Securities (MBS) Program. The amount of net servicing income generated by each Issuer portfolio is a key factor impacting that Issuer’s ability to remit scheduled payments to security holders. Currently, Issuers can create Ginnie Mae pools or loan packages that yield servicing spreads ranging from 19 to 69 basis points (bps). Issuer pooling practices that result in overall portfolios with servicing spreads that fall on the lower end of the possible range may not generate sufficient amounts of servicing income to withstand periods of financial stress, and therefore may have an adverse impact on the stability of the MBS Program. As part of a series of counterparty risk management policy updates, Ginnie Mae is implementing the following requirement:
New Minimum Portfolio Servicing Spread Requirement
Effective March 1, 2020 (Effective Date), Issuers will be required to have, and maintain at all times, a weighted average servicing spread of at least 25 bps for their Ginnie Mae portfolio comprised of forward, fixed-rate, Single-Family loans (Minimum Portfolio Servicing Spread). Please note that this general requirement applies at the portfolio level, not at the pool or loan package level. Issuers may continue to create Ginnie Mae pools and loan packages that yield servicing spreads within the ranges permissible under Section 24-2(A)(1)(c) of the MBS Guide so long as the Issuer’s overall portfolio servicing spread does not fall below the required minimum. For reference, the average servicing spread of all Single-Family Ginnie Mae ll pools and loan packages is approximately 36.7 bps. If weighted by unpaid principal balance, the average servicing spread of the same is approximately 35 bps.
Effect on Transactions that Pledge or Encumber Servicing Income
Subject to the limitations outlined in Chapter 21 of the MBS Guide, Issuers may continue to execute transactions that pledge or otherwise encumber their Servicing Income or servicing rights. Any amount of Servicing Income or servicing rights that is pledged or encumbered in accordance with Chapter 21 of this Guide will not be excluded from the computation of the Minimum Portfolio Servicing Spread required by this Subsection 3-21(C).
Effect of Non-Compliance
Any Issuer that does not have Minimum Portfolio Servicing Spread of at least 25 bps by the Effective Date may be subject to additional requirements, which could include, but are not limited to, restrictions on pools or loan packages with servicing spreads that are lower than the Minimum Portfolio Servicing Spread, or other minimum servicing spread determined by Ginnie Mae at its sole discretion. Ginnie Mae will notify in writing any Issuers at risk of non-compliance ahead of the Effective Date.
Chapter 3 of the MBS Guide is modified effective immediately to incorporate new subsection 3-21(C) Minimum Portfolio Servicing Spread Requirements, which contains additional details, as well as the definitions and formulas pertaining to this announcement. Please contact your Account Executive directly with any questions or concerns.
|2/12/2019 - APM 19-01|
Ginnie Mae is
undertaking a comprehensive revision of the MBS Guide, for the purpose of
harmonizing changes to this document (and associated processes and systems) that
have occurred over the years. This revision is intended to improve the form of
the document, and is not implementing policy changes. It is expected to take
much of 2019 to complete, and further guidance will be made available when it
comes closer to fruition.
This ongoing effort has
occasioned the need for a review of the process by which certain terms of the
Guide have been waived from time to time, because in many cases the
justification for a waiver, or the citation by which it was effected, have been
or will be altered by the upcoming revision, or by other circumstances
subsequent to original issuance of the waiver.
Ginnie Mae hereby requires
that all participants submit the following information via e-mail to GinnieMaeWaiver@hud.gov by 5:00pm
Eastern Time on March 15, 2019 for each waiver held:
PDF (Portable Document Format) copy of the waiver as an attachment;
participant’s (Issuer/Document Custodian) name and Ginnie Mae ID on the subject
brief narrative describing the participant’s continued need for the waiver, if
any, on the body of the email.
Upon receipt of the
email and information, Ginnie Mae will begin the process of examining the need
for re-issuance of the corresponding waiver. If Ginnie Mae determines that a
given waiver should not be re-issued, Ginnie Mae will inform the participant in
writing about this determination and outline any necessary actions that the
participant may need to take, if any. Ginnie Mae will automatically rescind any
waiver that is not submitted in accordance with this memorandum, including
waivers that are submitted without all of the information requested above.
All waivers submitted via
e-mail to GinnieMaeWaiver@hud.gov will remain in effect
until the earlier of the date of expiration per the terms of the original
waiver, the date of re-issuance, or May 1, 2019. When re-issued, the waivers will reflect
revised citations to the MBS Guide, which may be different from or in addition
to the citations reflected on the waiver when it was initially issued or
Please note that this
recall does not apply to waivers or variances granted as part of an R&W Agreement,
an Acknowledgment Agreement, or other agreements executed by both Ginnie Mae
and a program participant. Ginnie Mae will be reaching out individually to any
program participant with such agreements to coordinate any necessary updates.
If you have any
questions, please contact your Account
|12/21/2018 - APM 18-08|
Pursuant to the Housing
and Economic Recovery Act of 2008 (HERA), the Federal Housing Finance Agency
(FHFA) has announced increased conforming loan limits. Accordingly, Ginnie Mae
is revising its definition of High Balance Loans as follows. Effective for
issuances on or after January 1, 2019, a High Balance Loan is defined as a single-family
forward mortgage loan with an original principal balance (minus the amount of
any upfront mortgage insurance premium) that exceeds the following limits:
Maximum Loan Amounts
(net of any financed MIP or Guaranty Fee)
Contiguous 48 States, District of Columbia, American
Samoa, and Puerto Rico
Alaska, Hawai’i, Guam, and the U.S. Virgin
Additional information on conforming loan limits for the Commonwealth of the
Northern Mariana Islands may be obtained directly from FHFA. High Balance Loans
are eligible for Ginnie Mae MBS subject to the restrictions detailed in
Sections 9-2(B) and 24-2(A)(1) of the Mortgage Backed Securities Guide, HUD Handbook
5500.3, Rev-1 (MBS Guide).
If you have any
questions regarding this announcement, please contact your Account Executive in
the Office of Issuer and Portfolio Management directly or at (202) 708-1535.
|11/15/2018 - APM 18-07|
Ginnie Mae monitors Issuer performance and requires Issuers to engage in practices that are consistent with its mission and the integrity of the Mortgage-Backed Securities (MBS) Program. To promote stability and liquidity in the secondary market, Ginnie Mae is implementing a series of updates to its counterparty risk management framework to strengthen the financial resilience of Issuers. The following MBS Program policy changes constitute the first set of program policy adjustments in this series.
Issuer Application Process
In addition to examining an applicant’s financial qualifications against the minimum financial standards in the Guide (such as net worth and liquidity), Ginnie Mae will perform corporate credit evaluations. The credit evaluation, which is similar to those employed by credit rating agencies, will be used by Ginnie Mae to determine whether an applicant is qualified and whether such approval is conditioned upon the imposition of additional requirements, even if minimal financial standards are met. Ginnie Mae also applies additional scrutiny to applicants relying on a subservicer arrangement to ensure that any newly approved Issuer possesses the competencies required to meet and oversee the servicing and investor reporting obligations required by the MBS Program. If a proposed subservicer arrangement is deemed unsatisfactory for approval and the application is denied, further consideration would require the re-submission of a new application. Lastly, new applicants are no longer being asked to complete the Ginnie Mae online university courses, as the course modules are no longer available on Ginnie Mae’s website. These MBS Guide changes have been incorporated to Chapter 2 and Chapter 7 of the MBS Guide.
New Notification Requirement – Subservicer Advance and Servicing Income Agreements
Effective immediately, Ginnie Mae is implementing new notification requirements for Issuers engaged in certain subservicer advance or servicing income agreements, which do not require prior Ginnie Mae approval, but can impact an Issuer’s ongoing liquidity position and financial obligations. While Ginnie Mae currently permits subservicers to advance funds on behalf of an Issuer to pay security holders under the MBS Program, subservicers will now be required, upon request, to notify Ginnie Mae about such advances, including details about the frequency, amount, and purpose. Similarly, Issuers that enter into pledges of servicing income, or other transactions that encumber an Issuer’s Servicing Income, that are not subject to an Acknowledgment Agreement, must notify their Account Executive via email no later than 15 business days after the date that the transaction agreement is executed. Upon notification, Ginnie Mae may require the Issuer to provide the specific terms of the transaction, relevant documentation, or updated financial information. In addition, as a one-time requirement, all Issuers that have executed pledges of Servicing Income, or other transactions that encumber that Issuer’s Servicing Income (not subject to an Acknowledgment Agreement) as of the date of this Memorandum, must notify their Account Executive via email 1) that the Issuer has executed one or more such transactions; and 2) the date that any such transaction was executed. This one-time notification should occur no later than December 15, 2018. These notification requirements have been incorporated to Chapter 4 and Chapter 21 of the MBS Guide. For avoidance of doubt, such notifications do not constitute any approval by Ginnie Mae of the pledge and do not provide the subservicer or any other party with any rights with respect to the Issuer’s servicing portfolio.
Factors Governing the Imposition of Enhanced Financial or Operational Requirements
Section 3-8 of the MBS Guide grants Ginnie Mae discretion to impose additional financial or operational requirements on program participants when warranted by market conditions or other relevant factors that may impair an Issuer’s ability to meet its obligations under the MBS Program. As part of this first series of counterparty risk policy updates, Ginnie Mae is announcing a list of risk factors that may trigger the imposition of enhanced financial or operational requirements on a specific Issuer, in consideration of that Issuer’s current financial standing, financial history, and overall compliance. These factors have been incorporated to Section 3-21(B) and are effective immediately.
Restatement of Issuer Financial Requirements
As part of ongoing efforts to standardize and modernize the MBS Guide, Ginnie Mae is restating Issuer financial requirements, including net worth and liquidity, but is not changing those requirements at this time.
In consideration of the number and nature of the MBS program changes implemented by this memorandum, and APM18-06, Ginnie Mae is including updated versions of MBS Guide Chapters 2, 3, 4, 7, and 21 as attachments to this APM. Issuers should review carefully the updated MBS Guide chapters. The guidance discussed here, as incorporated in the revised MBS Guide and Guaranty Agreements should serve as a basis for ongoing Issuer reviews. Issuers should consult with Ginnie Mae as necessary to ensure that their participation meets standards of acceptability.
If you have any questions regarding this announcement, please contact your Account Executive directly.