Citing an increase in the volume and complexity of requests for business status change approvals from its issuers, Ginnie Mae announced Tuesday a series of changes to its requirements for participating issuers.
According to Ginnie Mae, the company is updating the requirements for notification and prior approval of changes for its issuers’ business status. Ginnie Mae said that the changes are designed to increase efficient business operations for Ginnie Mae and its issuers.
Among other items, the changes address issuers that are facing a regulatory matter. The changes also impact companies going through mergers or changes of ownership.
“The housing finance industry is continuing to evolve in response to changes in the economic and regulatory environment, and Ginnie Mae must evolve with the industry,” said Michael Drayne, Ginnie Mae’s senior vice president of issuer and portfolio management. “Our rapid increase in volume, coupled with the growing complexity of the business operations of our issuers, means that Ginnie Mae must be very responsive as it continues to support the industry.”
According to Ginnie Mae, the changes are:
1. Previously, Ginnie Mae required issuers to provide Ginnie Mae written notice within five days of any “material adverse change” in its business relationship with Fannie Mae, Freddie Mac, the Federal Housing Administration, as well as other governmental departments or any other supervisory or regulatory agency.
Ginnie Mae’s new requirements have been modified to “make explicit” that this notice requirement also applies to any material adverse change in an issuer’s business relationship with any banking agency, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau and state licensing or regulatory agencies.
2. Previously, Ginnie Mae required issuers to provide Ginnie Mae with a written notice, as well as other legal and financial documents, at least 30 days prior to the effective date of a merger.
Going forward, Ginnie Mae has reduced the required number of documents that issuers must provide Ginnie Mae, and changed the time at which they must be submitted. Issuers will now have 30 days from the completion of the merger to submit the documents.
Additionally, Ginnie Mae said that in light of its new streamlined documentation requirements, issuers are now required to provide written notice at least 60 days prior to the desired effective date of a merger to afford Ginnie Mae sufficient time to approve or deny continued participation of the surviving entity in the mortgage-backed security program.
3. Ginnie Mae previously defined “change in ownership or control” as a change in ownership of 20% more of the stock or other ownership interest in the issuer or an issuer’s guarantor.
The terms “principal owner” and “control” are now defined according to the Statement of Financial Accounting Standards No. 57 (FAS-57) issued by the Financial Accounting Standards Board.
Additionally, in the event of a change in principal ownership or control of an approved issuer or the issuer’s guarantor, Ginnie Mae requires that the issuer provide written notice at least 30 days prior to the desired effective date of the change.
Ginnie Mae also requires that the issuer provide a variety of legal and financial documents within 30 business days after the completion of the change.
Under the new guidelines, the number of documents that Ginnie Mae needs to review when an issuer or guarantor is undergoing a change in ownership or control has been reduced.
4. Ginnie Mae now requires issuers that plan on executing a transfer of assets to provide Ginnie Mae written notice regarding the transfer at least 30 days prior to the desired effective date.
Upon receipt of this notice, Ginnie Mae will determine whether to approve or deny an issuer’s continued participation in the program.
According to Ginnie Mae, a transfer of assets is any transfer of a principal element of the issuer’s business assets related to the origination, underwriting, or servicing of mortgage loans without the transfer of accompanying liabilities, not including the transfer of non-Ginnie Mae mortgage servicing rights.
Ginnie Mae stated that the changes to its requirements are effective immediately.