As nonbank companies become more commonplace versus traditional banks in the mortgage market, Ginnie Mae (NASDAQ:GNMA) is evaluating whether the government-backed agency’s issuers have enough easy-to-sell assets to survive in times of distress, Bloomberg reports.
Ginnie Mae, which is the only securitizer of Home Equity Conversion Mortgages (HECMs), may increase liquidity requirements for the firms that issue and service Ginnie Mae bonds to protect its profits and taxpayers from losses, agency President Ted Tozer told Bloomberg.
Nonbanks serviced 35% of Ginnie Mae’s single-family loans as of June, and issued 54% of its new securities that month, the report states. Banks have been selling contracts to nonbanks and scaling back lending that creates new ones — and the trend is likely to push banks’ share of mortgage servicing down to 50%.
So Ginnie Mae is now considering raising its capital or liquidity requirements, and potentially tying them to items such as the amount of delinquencies or share of the Department of Veterans Affairs mortgages in a servicer’s portfolio, Tozer said. But any new rule Ginnie Mae adopts will apply to more than just nonbanks.
Other regulators are also reviewing nonbanks and are focusing on issues such as companies’ potentially weaker financial standing and the damage that their collapses might make on counterparties or the system. This attention has led to a slowing of approvals of servicing rights sales to nonbanks, Bloomberg writes.
To read the full Bloomberg article, click here.
Written by Emily Study