Ginnie Mae Announces New Servicing and Issuer Application Rules

The Government National Mortgage Association, or Ginnie Mae, announced this month that it is implementing new evaluation rules that analyze the credit strength of new issuers, and implements new notification requirements for issuers engaged in certain subservicer advance or servicing income agreements.

The new rules act to, “[codify] Ginnie Mae’s ability to impose additional financial or operational requirements on program participants when warranted by market conditions,” according to an accompanying press release.

Detailed in an All Participants Memorandum (APM 18-07), the rules act by requiring servicers to notify Ginnie Mae if any arrangements are made to finance their mortgage servicing rights (MSRs), which will ensure that Ginnie Mae can monitor risks as they move throughout the system.

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The APM also updates application requirements for new issuers so that applicants who would previously appear on Ginnie Mae’s internal financial conditions watchlist are not approved as issuers; and clarifies Ginnie Mae’s authority to require additional financial and/or operating requirements before certain issuers are authorized any additional commitment authority.

The press release notes that there are almost 400 approved issuers of Ginnie Mae mortgage-backed securities (MBS). As of September 30, 2018, just over $2 trillion of Ginnie Mae MBS were outstanding, which numbers over 11 million loans.

“These enhancements add to the factors Ginnie Mae will consider as we keep pace with an evolving mortgage market, protect taxpayers, and ensure that important differences in risk among issuers and servicers are properly accounted for,” said Michael Bright, Ginnie Mae EVP and COO in the organization’s accompanying press release.

“Our goal continues to be the assurance of a safe and sound program as well as a healthy mortgage-backed security,” he said.

Ginnie Mae is the entity through which reverse mortgage lenders issue HECM mortgage-backed securities (HMBS).

Written by Chris Clow