Ginnie Mae’s report suggests a commitment to restoring the lending environment

Ginny Mae this week released its financial report for fiscal year 2024, which explains how the company intends to provide money for the mortgage industry, affordable housing and value for American taxpayers. As housing advocates continue to ask the company for full funding Congressthe company also highlighted the work it has done this year in the reverse mortgage industry.

Ginnie Mae oversees the Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) program, which was hit hard at the end of 2022 by the collapse of the major mortgage lender. But the company aims to address liquidity challenges by starting work that will culminate in a new, integrated HMBS system that it and the reverse mortgage industry are calling “HMBS 2.0.”

Fluid development work

The new amendment program was highlighted several times in Ginnie Mae’s annual report as evidence of the company’s work to improve liquidity and market participation.

“In an effort to increase eligibility and revitalize the HMBS program, Ginnie Mae has published a proposed term sheet for a new reverse mortgage security, HMBS 2.0, and offered a public comment period to get feedback from industry stakeholders.”

After the first term sheet was published in the summer, the last term sheet was published last month. The report detailed what the company sees as the best way to pursue a comprehensive mortgage securities program, including its entire commitment to the reverse mortgage space.

“Ginnie Mae is focused on supporting lenders’ capital to ensure a strong and stable financial system and to ensure borrowers have access to affordable credit throughout economic cycles,” the company said in the forward-looking section of the report. “Working with partners and industry partners, Ginnie Mae will work to find solutions that can support this goal. One such project is HMBS 2.0.”

The company is committed to “maintaining an effective HMBS program that meets the needs of America’s aging population,” the report said, and will continue to work with its partners and industry stakeholders to facilitate financing.

“We believe that the approach we are on, in collaboration with industry stakeholders, will play an important role in developing the HMBS program,” the report explains. “The proposed changes will provide issuers with better access to liquidity and lead to a stronger HMBS market.”

Original HMBS and 2.0 program work

In addition to the development work that has gone into HMBS 2.0, the report also details the ongoing work on the original HMBS system.

“Come in [September] In 2023, Ginnie Mae updated the existing HMBS requirements in the guide to allow multiple borrower securitizations or draws in the same month,” the company explained. “The development has reduced the amount of time additional participations need to be held and is intended to reduce short-term pressure on issuers to pay fees.”

HMBS issuance data over the past year has shown that there has been a steady stream of securities holdings under this change. Additionally, there was a change in early 2023 that reduced the minimum required size for all types of HMBS pools from $1 million to $250,000.

The latter step helped to “slightly improve the liquidity of HMBS issuers using it,” New View Advisors colleague Michael McCully told HousingWireReverse Mortgage Daily (RMD) for October.

HMBS 2.0, if implemented, will also provide “a new type of hedge pool to allow for reinsurance opportunities for active and passive purchases,” which “would aim to further support the refinancing of issuers held in this challenging environment.”

HMBS 2.0 may also have potential implications beyond the reverse mortgage industry. In a recent offer to purchase (EBO) submitted to Ginnie Mae by Mortgage Bankers Association (MBA), a white paper outlining the proposal said HMBS 2.0 could provide guidance on the potential use of a similar system for the former mortgage market.

“We believe that the issuance of the new HMBS 2.0 system may provide a planning template for Ginnie Mae staff as they develop the terms and conditions for the issuance of a potential EBO collateral product,” the MBA paper explains.

Related