Lenders applying for Ginnie Mae mortgage-backed approval will find it more challenging in the coming months, according to one official.
"We're undergoing a philosophical re-examination of the question: Who is it that should be a Ginnie Mae issuer," asks Michael Drayne, senior vice president of the Ginnie office of mortgage-backed securities.
The agency guarantees timely principal and interest payments on bonds backed by primarily Federal Housing Administration and Veterans Affairs mortgages. Its roughly 300 issuers must be able to originate, underwrite and service these loans based on a given set of requirements.
Ginnie will issue new policy in the coming months, making it stricter to get approval, Drayne said while speaking at the Mortgage Bankers Association secondary conference Monday.
Ginnie is big business. It currently finances roughly 25% of the mortgage market, according to Laurie Goodman, senior analyst at Amherst Securities. And half of its business is currently purchase loans.
"If we continue to do what's simply in the guide, we would have 500 new issuers over the next two years," Drayne said, hinting that a new issuer's ability to service mortgages will be a priority.
According to the current policy, issuers seeking approval must demonstrate the ability to do the job and have certain practices in place. Single-family issuers must also hold a minimum net worth of $2.5 million. Under the new guidelines, potential issuers must be able to demonstrate they have the capital to keep moving cash to investors and to service these loans during any type of economic cycle, not just the current one, Drayne said.
"If we ask a firm how they're going to service the loans, and they come back and say, 'Well, we're going to just use a subservicer," that entity won't be approved," Drayne said.
Anthony Reed, senior vice president at Fannie Mae, said the approval process for his agency will slow down as well. Fannie and Freddie Mac fund the majority of the mortgage market not covered by Ginnie.
"Our process can take up to 180 days to get approved," Reed said. "When we're providing this much liquidity, we have to be selective and we must prioritize our approvals."
Changes are not just for potential issuers. Current ones must disclose new data points beginning in September as part of an effort to provide more transparency to a growing agency. Its issuance in March increased 21% from last year.
Drayne could not disclose what specific requirements would be in the Ginnie Mae changes, but he promised it will be different from what the agency does now.
"Just trying to give people some indication of what direction we're going in," Drayne said.