Ginnie Mae clarified what qualifies as a repurchase event for its HECM MBS issuers last week.

“Issuers are obligated to purchase all Participations related to a HECM when the outstanding principal balance of the related HECM equals or exceeds 98% of the maximum claim amount,” said Ted Tozer, President of Ginnie Mae.  “Such obligation is referred to as a Mandatory Purchase Event.”

According to the memorandum, issuers must timely purchase any participation when a mandatory purchase event occurs, regardless of whether the issuer has received a mortgage insurance claim payment.

“For example, if mortgage insurance proceeds are not available because an assignment request is being processed or the HECM is not otherwise eligible for assignment, then the Issuer must advance its own funds to purchase the Participations,” said Tozer. “Ginnie Mae relinquishes all right, title, and interest it has in the HECM upon payment of the amount to purchase the related Participations.”

For more information on the repurchase obligations, see here.