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Ginnie Mae changes HMBS pool eligibility requirements to address liquidity challenges

A leading reverse mortgage representative lauded the development as the industry continues to face obstacles

The Government National Mortgage Association (Ginnie Mae) on Friday announced a new policy for its Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) program, now allowing the securitization of multiple participations related to a particular HECM in any one issuance month. This is according to the publication of All Participant Memorandum (APM) 23-11.

“Ginnie Mae’s HMBS program changes will enable issuers continuous access to capital market sources of funding to securitize HMBS participations throughout the month,” said Alanna McCargo, president of Ginnie Mae in a statement accompanying the announcement.

“Our goal is to improve issuer liquidity and strengthen this important program for America’s seniors.”

RMD reached out to Ginnie Mae for additional comment but did not hear back by publication time. The new policy is scheduled to go into effect on Oct. 1.

New policy

Prior to the APM’s publication, Ginnie Mae HMBS requirements limited securitization to one participation related to a particular HECM loan each month.

“Issuers utilize a combination of financing vehicles and working capital to finance HECM disbursements between the time that the HECM loans are originated or the HECM draws are funded and when the participations are securitized into HMBS,” the company said in the APM.

“Depending on timing, issuers may be required to wait until the following month to securitize these participations into Ginnie Mae HMBS.”

This opened up a securitization to a potential delay, which could cause liquidity pressures felt by issuers while also causing “counterparty risk” to Ginnie Mae itself.

Additional requirements

With the new policy also comes additional requirements when pooling multiple participations on a particular HECM during a particular month. Participations must be sequential, and only one participation per HECM per HMBS is permitted, according to the APM.

“Any prior pools containing participations on a given HECM have been issued before additional participations can be submitted,” the APM said.

Finally, “when the participation is the result of a HECM disbursement occurring on a day other than the first of the month,” it must meet other specified requirements.

Industry response, recent history

The National Reverse Mortgage Lenders Association (NRMLA) lauded the move, commending Ginnie Mae for not backing down from a thorny issue that the association has been communicating with the company about.

Steve Irwin, president of the National Reverse Mortgage Lenders Association (NRMLA)
Steve Irwin

“NRMLA is very pleased with this guidance as issued by Ginnie Mae today,” said Steve Irwin, president of NRMLA, in an interview with RMD. “This is an issue the association has advocated on for several months, and Ginnie Mae devoted its resources and leaned into this complicated issue to get it across the finish line.”

This is the second policy shift from Ginnie Mae designed to address reverse mortgage liquidity challenges this year. In February, the company reduced the required minimum size from $1 million to $250,000 for all HMBS pool types.

“The rapid rise of interest rates and the current economic climate is creating liquidity pressure for HMBS issuers obligated to fund borrower draws and make timely payments to HMBS investors under Ginnie Mae’s Guaranty Agreement,” Ginnie Mae said of the move in February.

“Ginnie Mae is reducing the minimum HMBS pool size to relieve this pressure and decrease the amount of time Issuers must carry balances between the HECM loan origination disbursement and HMBS securitization.”

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