Ginnie Mae has played a major role in the mortgage industry’s downturn over the past two years, stemming from the failure of the industry’s largest lender that threatened the liquidity of other major players in the space. The state-owned company has long overseen the Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) program, where reverse mortgages are held and sold to investors.
Although the industry’s recent liquidity challenges have begun to be resolved under the leadership of former Ginnie Mae president Alanna McCargo, the company’s acting president, Sam Valverde, is currently in charge. This includes the final implementation of “HMBS 2.0,” a complementary program that the industry is watching with great interest.
To get an idea of where things stand with Ginnie Mae’s reverse mortgage service, HousingWireReverse Mortgage Daily (RMD) sat down with Valverde for an exclusive interview.
Small size, big value
When asked about his personal interaction with the mortgage program and other programs he is looking at, Valverde recognized the importance of this program in meeting the company’s mission.
“HMBS is a small part of our portfolio, but it is a very important part of how we meet our mission,” he said. “Ensuring that this important retirement tool remains available to older Americans is not only Ginnie Mae’s top priority – it is a shared priority among us, Federal Housing Administration (FHA), i US Department of Housing and Urban Development (HUD) in general, and our industry partners. It’s more important than ever because our population continues to grow, and many seniors will need a way to supplement their income without being fired. “
Similar to recent comments from FHA Commissioner Julia Gordon, Valverde offered support for the idea that the industry’s population has the potential to expand the reverse mortgage business base.
“I think the growing demographic demand for this program suggests that there is a new demand on the horizon that may support the growth of this program in the future, if we can strengthen it in the near term,” he said. “At Ginnie, we made addressing the issues facing the mortgage industry a priority, even when we had resource constraints to deal with. It will always be a priority moving forward.”
Industry cooperation, steps taken
When asked about the collaboration between Ginnie Mae and members of the real estate industry, Valverde said the joint work has paid off.
“[The industry has] we’ve been partners in the process — both generally and in developing our response,” he said. “Our issuers do and consolidate mortgages; Ginnie Mae can’t do that. We don’t serve consumers directly, so we rely on our issuers.
“When the tax rate caused the failure of the RMF, it became clear that we needed to take action to preserve the performance of the program for large borrowers, while ensuring that RMF borrowers were not adversely affected. We started to focus on many problems facing the sector.”
The first priority was to not charge fees, to ensure that lenders could continue to honor loan applications. That work began in October 2023, but there was also a need to address issues with older HECM loans placed on issuers.
“This year, we really started working together with the FHA, and they have done a lot to support lenders,” he said.
FHA has reduced its number of housing defaults by allowing residents to secure housing through other means. It also made it easier to apply for loans early while allowing servicers to resolve defaults faster by increasing incentives for borrowers, their heirs and servicers. But more work was needed, which is where HMBS 2.0 comes in.
“Even with all of this great work by the FHA, it was clear that there was still more to be done,” Valverde said. “Therefore, we began to explore a new securities system – what we and the industry were calling ‘HMBS 2.0.’ For that, we have consulted extensively with manufacturers and industry experts to identify market needs and get their views.”
Look for more from Sam Valverde on reverse mortgages and HMBS 2.0 soon on HousingWire’s RMD.
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