After just short of two months since being sworn in as the new chief for the Department of Housing and Urban Development, Secretary Julián Castro is outlining plans to rework the way Ginnie Mae operates.
In a second-annual summit held in Washington around the Government National Mortgage Association—the sole securitizer of Home Equity Conversion Mortgages—Castro spoke of five new policy initiatives to shape the future of Ginnie Mae.
Some of the motivation for the change stems from a retreat among large depository banks from mortgage lending, Ginnie Mae President Ted Tozer said in prepared remarks.
“The retreat of traditional depository banks from mortgage lending and servicing is transforming the housing industry,” he said. “In fact, 60 percent of our top ten issuers are non-depository institutions, this presents a variety of complex challenges for the industry.”
The “new” Ginnie Mae will include new net worth and liquidity requirements for lenders, the details of which will be announced in conjunction with the Mortgage Bankers Association annual conference this October. It will also incorporate changes to its Acknowledgement Agreement with an aim to expand liquidity by allowing issuers to further use servicing rights as collateral.
Additionally, a new dormant issuer policy will require issuers to actively participate within an 18-month time frame, with the first evaluation of this policy taking place on January 1, 2015.
Castro and Tozer also unveiled ongoing initiatives including “An Era of Transformation;” a position paper outlining the major issues impacting mortgage lending following the financial crisis, and how Ginnie Mae will approach them. They also noted a pilot program being implemented with the Federal Home Loan Bank of Chicago that will help give small institutions more access to the secondary market. The bank is expected to begin issuing securities as early as November.
Ultimately, the changes are with an eye toward housing market stability, Castro said.
“I want to send a simple message to lenders, including those in this room, let’s work together,” he said. “We share a common interest to see a robust, healthy housing market where those who are ready and responsible can buy a home. Let’s come together to secure the dream of homeownership not only for ourselves but for generations to come.”
Written by Elizabeth Ecker