Ginnie Mae reduces minimum size required for HMBS pools

These changes come after Ginnie Mae assumed servicing the portfolio of bankrupt lender RMF

Ginnie Mae announced on Thursday that it has reduced the required minimum size from $1,000,000 to $250,000 for all Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) pool types, according to the GNMA All-Participants Memorandum (APM) 23-04.

RMD requested additional comment from Ginnie Mae but did not hear back prior to publishing this article.

Changes to minimum pool size

“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 in an announcement of the APM. “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.”

In addition to the APM, Ginnie Mae is also revising its MBS Guide (Chapter 35, Part 7 §D) to incorporate the reduction in the minimum pool size. The changes announced this week will be applicable to all issuances starting on April 1, 2023.

“Each pool must still contain a minimum of three participations, each of which is related to a distinct HECM loan in accordance with Ginnie Mae MBS Guide,” Ginnie Mae said. “Additionally, all HMBS pool types are eligible for Ginnie Mae’s Platinum Certificate program which allows aggregation of small pools.”

The move illustrates that Ginnie Mae is actively paying attention to issues related to HMBS liquidity, according to Alanna McCargo, its president.

“Ginnie Mae is responsive to the market conditions our counterparties face in the reverse mortgage segment. This step allows quicker path to HMBS securitization and supports issuer liquidity,” McCargo said in a statement.

Reactions to the move

National Reverse Mortgage Lenders Association (NRMLA) President Steve Irwin said in a statement that the new policy should prove to be positive for the reverse mortgage business.

“NRMLA and its members appreciate the policy guidance issued in GNMA’s APM 23-04,” Irwin said. “This reduction in the threshold for minimum pool size is a great step in relieving some of our issuer members’ liquidity strains, which will certainly prove to be beneficial to the reverse mortgage industry.”

Former Ginnie Mae President Ted Tozer also said this should prove to be a step in the right direction.

“This is a sign of Ginnie Mae asking what it can do to enable liquidity to be injected into the system in a more timely manner,” Tozer said. “This will allow the servicers to come to market more frequently, and allows them to reimburse themselves for any monies they paid out of pocket. It’s not going to make a huge difference from the standpoint of the buyouts for the loan amounts reaching 98% of the MCA, but every little bit helps.”

With Ginnie Mae recently assuming control of the Reverse Mortgage Funding (RMF) servicing portfolio, Tozer said this move shows that Ginnie Mae is doing what it can to add liquidity to the system.

“This is showing me that Ginnie Mae is going through everything they can think about [as it relates to] how they can put more liquidity into the system without jeopardizing the Ginnie Mae [HMBS] program,” he said.

Recent history

RMF halted originations in November and filed for bankruptcy later that month. While there were expectations that another major lender would assume control of its servicing portfolio, that never occurred, and Ginnie Mae assumed control over the RMF portfolio late last year.

Ginnie Mae President Alanna McCargo and representatives for RMF have publicly stated that RMF’s borrowers should not be impacted by the move.

The exit of RMF was a massive shift in the reverse mortgage industry due to the company’s status as the largest lender.

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