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.”
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.