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Ginnie In Brief

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by Roy Hormuth | 6/4/2019

As non-banks have grown to become the largest segment of Ginnie Mae’s Issuer base, how Issuers use their mortgage servicing rights (MSR) has also grown in importance, as it is often the largest asset on the balance sheet for non-banks. This is at the forefront of Issuers’ minds because it is increasingly crucial to use as many tools as possible to generate working capital to manage business operations. Therefore, having the flexibility to use MSRs to shore up cash flow becomes more imperative than ever.

As of late, Ginnie Mae has taken strides to evolve advance financing options of Ginnie Mae MSRs. Top of the list is making our Acknowledgement Agreement more user-friendly for lenders and working with them to facilitate prudent lending on MSRs.

Liquidity boosts value and strengthens counterparties

In 2017, as part of an effort to promote liquidity, Ginnie Mae, along with Credit Suisse and PennyMac, helped introduce the first MSR financing securitization transaction. Since then, we have executed four more securitization transactions. Overseen by an independent credit manager that provides detailed monthly reporting, these innovative securitization transactions are important to Issuers and Ginnie Mae for a number of reasons because they:

  • Provide more stable long-term funding (five-plus years).
  • Broaden the lender base by bringing in institutional investors.
  • Lower the cost of funds by 200 to 300 basis points.

In addition to offering securitization transactions, we aim to increase Issuers’ liquidity options at times of stress. To that end, while historically we have only allowed lending against MSRs, we’re now working out the policy issues to allow lending against servicing advances, in limited circumstances.

Strengthening the value of the asset

As we move forward, we’re keeping the greater context of the market in mind. MSR pricing is tied to interest rates, which means greater stress in the market when interests rates are volatile, as they have been recently. Through conversations at industry conferences and discussions with Issuers, I’ve learned that several MSR deals were put on hold until pricing settled down. But lately, volatility has subsided, and that suggests investors may be taking new looks at entering the Ginnie Mae MSR market. The additional demand could help the value of an Issuer’s MSR portfolio, and that’s a welcome trend.

In addition, Ginnie Mae published a Request for Input (RFI) related to pooling selected VA guaranteed mortgages earlier this month. These higher-LTV VA mortgages have been prepaying at faster rates than economic conditions would predict, damaging the value and liquidity of all high-percentage VA MSRs in the market, while depressing the value of all Ginnie Mae MBS.

We are currently reviewing responses from the industry on the RFI yet there is more to do. As we continue to improve our program, we know how important it is to maintain open dialogue with our industry partners. I’m moderating a panel on MSR liquidity at the upcoming Ginnie Mae Summit and I look forward to engaging with our customers there.

The Benefits of Attending the 2019 Ginnie Mae Summit
by Michael Drayne | 5/21/2019

The 2019 Ginnie Mae Summit is fast-approaching, which means Issuers, lenders, investors and policymakers will soon get the chance to hear from, meet and engage with leading figures in the mortgage industry. This year’s two-day event, June 13 to 14 in Washington, D.C., will feature an array of prominent speakers, edifying breakout sessions and insightful panels focusing on a wide range of subjects.

Remarks by high-ranking administration and agency officials as well as policy, thought and business leaders are scheduled throughout the Summit. Along with officials from the Department of Housing and Urban Development and Ginnie Mae, speakers include representatives from the Mortgage Bankers Association, Urban Institute, Freddie Mac, BoA Securities and Credit Suisse.

Attendees will hear from experts about the state of the housing finance system, what’s in store for its future and how stakeholders will be affected. Speakers will touch on recent changes to Ginnie Mae’s MBS guide, certification requirements and compliance reviews as well as areas of upcoming modernization and much more.

In the above video, Michael Drayne, Ginnie Mae’s Senior Vice President in the Office of the President, describes the Summit breakout session that most excites him and the opportunity that it will provide for Issuer participants.

A valuable perk of attending is being able to ask the experts questions. The Summit also features opportunities for professional development such as training sessions, program overviews and networking events.

Don’t miss out on the 2019 Ginnie Mae Summit! Registration and hotel accommodations are filling up quickly, so be sure to book soon.

Register for the 2019 Ginnie Mae Summit

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by Maren Kasper | 5/7/2019

Over the past 18 months, we’ve taken a number of steps to combat lending practices that harm the market predictability of Ginnie Mae mortgage-backed securities (MBS) and increase the cost to borrowers financed by the government mortgage programs Ginnie Mae supports. Loan-level data analysis and input provided by investors directly and clearly indicates that the Ginnie Mae II Multi-issuer Program (GII MIP) securities, backed by selected Veterans Affairs (VA) mortgages, are susceptible to refinance activities out of proportion to what should be expected from prevailing interest rates. In addition to their effect on Ginnie Mae MBS, such refinancing practices can negatively impact borrowers’ financial situations.

Deterioration in the pricing of our GII MIP securities translates directly into a higher cost of homeownership for the homeowners the Ginnie Mae MBS program is intended to serve, including all VA, FHA and USDA borrowers. Therefore, it’s vital we take the steps necessary to protect the value of the Ginnie Mae security. Doing so will ensure the lowest possible rates for all borrowers in the program and protect VA borrowers from excessively high borrowing costs.

As part of this effort, we’re evaluating whether to exclude or restrict certain categories of loans that have shown the tendency to pay off faster than loans originated under more restrictive FHA, Fannie Mae or Freddie Mac loan-to-value (LTV) policies. For example, we’re taking a targeted look at VA cash-out refinances in excess of 90%. To support our evaluation, we’ve issued a request for input to solicit thoughts from stakeholders about the impacts of potential changes.

We know placing restrictions on any loan category has implications for borrowers, our Issuers and, ultimately, investors in our security. Because of this, we’re seeking guidance, which we will review carefully.

The RFI seeks insight into:

  • The acceptability of pooling mortgages by different loan categories based on varying expected prepayment performance.
  • Whether the threshold for our contemplated restriction should be set at a 90% LTV.
  • What the impact of high LTV VA cash-out refinances is on the pricing of GII MIP.
  • Alternative paths for the securitization of loan categories that we want to restrict from the GII MIP.

Ginnie Mae has the authority to implement requirements for acceptable loan characteristics on mortgages issued into our securities if we believe doing so is essential to the overall effectiveness of the MBS program. We’re committed to using in-depth analysis and evaluation to make educated decisions that will help protect the price of the security. Maintaining the value of Ginnie Mae securities in the market is the surest way for us to help keep mortgage rates low for American homeowners.

Read the request for information.

Respond to the request by emailing gnma.rfi.submission@hud.gov no later than 3 pm Eastern Time on May 31, 2019. Responses will be kept confidential and will not be made available to the public.

What You Can Expect at the 2019 Ginnie Mae Summit
by Maren Kasper | 4/9/2019
The 2019 Ginnie Mae Summit, scheduled for June 13-14, is your chance to meet and network with members of the mortgage finance industry. It is a unique opportunity for issuers, lenders, investors and policymakers to convene in the same room and discuss topics ranging from counterparty risk to platform modernization. In the above video, Ginnie Mae’s Acting President and EVP Maren Kasper discusses the reasons why this event is one that members of the mortgage finance industry will not want to miss.

 

Registration and hotel accommodations are filling up fast, so be sure to book soon: https://bit.ly/2K1hL2r  

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by Maren Kasper | 3/21/2019

Every time Ginnie Mae takes a step to strengthen the value, performance and desirability of our security, we have one goal in mind: expanding homeownership in America. It’s at the heart of our mission and what we were created to do.

Protecting the Ginnie Mae security ensures liquidity in the market, accessibility for borrowers and stability for investors.

Expanding global market awareness and overseas demand for Ginnie Mae mortgage-backed securities is one way we are increasing liquidity. That helps lower costs and expand opportunity for low- and moderate-income borrowers. Ensuring investors have confidence in the Ginnie Mae security is paramount to the functioning of the U.S. system of housing finance in which we play such an important role. In doing so, we’re able to increase global capital flows in support of the U.S. housing market. At the end of February, foreign investors held almost 24 percent of Ginnie Mae MBS.

To understand why protecting our security is so critically important to Ginnie Mae and our mission, we point to the reasons the U.S. Congress established our agency in 1968. Congress chartered Ginnie Mae to perform five primary functions:

  • Provide stability in the secondary market for residential mortgages;
  • Respond appropriately to the private capital market;
  • Provide ongoing assistance to the secondary market for residential mortgages by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing;
  • Promote access to mortgage credit throughout the nation; and
  • Manage and liquidate federally owned mortgage portfolios while minimizing adverse effects on the residential mortgage market and loss to the government.

In other words, responding to concerns about security protection is not just a top priority for us. It’s our statutory obligation as we continue to innovate new solutions to minimize risk for participants in the secondary market.

Ginnie Mae is committed to eliminating the problem of prepayment speeds that evidence material deviations from market norms and without reasonable connection to economic fundamentals. We are working with issuers to highlight responsible lending practices that will not only have a positive impact on the borrowers they serve, but also protect our security — which helps the entire housing-finance ecosystem.

The Ginnie Mae program has enjoyed 50 years of success despite significant changes in the market for mortgage finance. This success has been achieved with the support of market participants cognizant of the need for Ginnie Mae to evolve its approach to changed circumstances. The advent of continuous monitoring of prepayment performance and the adoption of policy changes necessary to protect our security is another significant step in the development of the program. Our work is not done. We are fully committed to eradicating concerns about market instability that excessive prepayment speeds create so that investors can confidently rely on a more market-predictable security, in order to serve borrowers with safe, affordable and sustainable mortgage financing.

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Last Modified: 6/22/2018 7:24 PM