Ginnie Mae is the only secondary mortgage market player to offer an explicit government guarantee to its mortgage-backed securities.
And now, the full faith of the Federal Government is coming with an uptick in issuer oversight, according to a Ginnie Mae release from today.
Ginnie Mae is getting the word out that it is actively monitoring the pooling activity of issuers to identify behavior that violates the latest changes to issuer policies.
Any issuer that does not comply with the program requirements will be subject to sanctions, Ginnie Mae said.
Earlier this year, Ginnie Mae announced that it was launching an investigation into mortgage lenders that were aggressively targeting service members and military veterans for quick and potentially risky refinances of their mortgages.
The investigation came on the heels of a letter from Sen. Elizabeth Warren, D-Massachusetts, who cited a report from the Consumer Financial Protection Bureau, which covered complaints received from veterans about Department of Veterans Affairsmortgage refinancing.
Later, SIFMA, a prominent secondary market trade group voiced its concerns in a letter it sent to the company. In the letter, SIFMA President and CEO Kenneth Bentsen said that the group and its members support the Ginnie Mae and VA efforts to address the issue because investors have already seen the down-the-line impact on mortgage-backed securities.
Ginnie Mae is also now increasing the tracking and analysis of prepayment rates.
“Any issuer with pool performance that appears out of step with market peers will receive increased attention and engagement from Ginnie Mae,” the statement said. “Furthermore, prepayment information will now be included in Ginnie Mae’s Issuer Operational Performance Profile (IOPP) scorecard, which is used to evaluate issuers against their peers.”
This is all part of a continuing effort to address the detrimental loan churning and high prepayment speeds Ginnie Mae found recently in its securities.
“These changes, along with additional measures under consideration, are being made to ensure the continued strength and liquidity of the Ginnie Mae MBS Program,” said Michael Bright, Ginnie Mae CEO.
Late last year, Ginnie Mae imposed seasoning requirements for streamline refinance loans to address rapid prepayments, which were negatively impacting the performance of certain Ginnie Mae securities.
Today’s announcement expands pooling restrictions to cash out refinance loans, and outlines additional measures taken to protect the Ginnie Mae security.
Here are the full details:
Effective April 1, 2018, streamline and cash out refinance loans can only be pooled into Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools if six monthly payments have been made on the underlying loan and the refinance occurs no earlier than 210 days after the first monthly payment is made on the initial loan. Any covered loans that do not meet these requirements are prohibited from being pooled into Ginnie Mae standard MBS pools.
The announcement also provides details regarding the refinanced loans that are not restricted for inclusion in Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools. To be eligible for Ginnie Mae pools, loans must meet the requirements for a fully underwritten rate term refinance loan under rules set forth by the respective federal housing program or benefit administrator.