Ginnie Mae Raises Net Worth Requirements for Single Family Issuers

Ginnie Mae announced new net worth requirements for single family issuers to strengthen its operations and ensure the program better aligns with the rapidly changing housing finance market last week.

“There’s no question that the financial landscape over the past few years has produced uncertainty and new risks,” said Theodore Tozer, Ginnie Mae president. “To ensure that we continue to run a conservative and sound program, Ginnie Mae will soon raise its net worth requirements, implement institution-wide capital ratio requirements, and establish a liquid asset requirement for all Single-Family Issuers.”

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Expected to take place in September, net worth requirements will climb from $1 million to $2.5 million plus 1 percent for outstanding MBS of $5 million to $20 million and 0.2 percent for amounts above that.  Ginnie Mae will also require that issuers maintain 20 percent of the net worth in cash or cash equivalents and set a liquid asset requirement for all single family issuers.  The changes will be phased in for all current single family issuers and is designed to ensure issuers have a greater capital cushion to absorb losses.

“By imposing these important requirements, Ginnie Mae is committed to prudently managing risk while furthering its mission to ensure the 30-year, fixed-rate mortgage is possible for millions of families no matter the market condition,” Tozer said. “We are the bright spot in housing for a reason; our monitoring process ensures we remain steady in a turbulent market. These new rules are the next step in our evolution.”

According to a spokesperson for Ginnie Mae, the new net worth requirements do not apply to HECM MBS (HMBS) issuers.

Ginnie Mae suspended the approval of new HMBS issuers earlier this year to review the risks associated with the program. The agency wouldn’t comment on when the new HMBS issuer requirements would be published, but sources close to the process tell RMD the new net worth requirement could be as high as $10 million.

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  • I think that everyone understands that Ginnie Mae needs to manage their risk appropriately. The TBW failure last year on the forward side was an eye opening experience for them as to just how suceptible they could be to lender failure.rnrnHowever, you have to step back and wonder if a $10 million potential net worth requirement is appropriate. Sure, they are buyouts when the loans reach 98% of the maximum claim amount and there is a higher level of portfolio and cash management that is needed by an institution to engage in an HMBS security.rnrnHowever, there are very few companies in the reverse industry that will meet that high of a net worth requirement. So, what are we left with? Selling to the top 3 or 4 lenders in the business who can meet those requirements. We’re right back to where we were 5 years ago when Fannie Mae had a strangle hold on the secondary market.rnrnI’m preaching to the choir, but more secondary investor options for this industry are needed and will be the cornerstone to our growth. We will remain a niche industry for a long time to come if we are (again) going to rely solely on one secondary market execution option.

  • Wow! How fascinating is the convoluted process of GNMA approval. Do the new requirements affect all applicants currently awaiting approval? Or by suspending the approvals has GNMA sent all of the applicants back to square one?

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