“Supporting the reverse mortgage market is Ginnie Mae’s top priority,” Valverde told house lineThe Reverse Mortgage Daily (RMD) is in your email. “We have dedicated resources working throughout the consultation period to implement the plan immediately.”
The new term sheet details several differences from the current HMBS program, including reducing the HMBS pool size to 95% of the total unpaid principal balance (UPB) of the loan, a move intended to “create additional economic incentives to Protecting Ginnie Mae and taxpayers against declining collateral values,” the company explained.
“Ginnie Mae’s team works hard to promote stability and growth in our markets, communities and families,” HUD Acting Secretary Adrianne Todman said in a statement. “It is critical that we enhance existing tools to better support seniors and the reverse mortgage industry. We look forward to receiving feedback on how best to do this.
Tail participation is also subject to a 95% UPB limit. According to the term sheet reviewed by RMD, to be eligible to participate in HMBS 2.0, an issuer “must meet the HECM and HMBS program requirements and have the commitment rights to issue MBS”.
Additionally, “each pool must have an original principal balance of $250,000 on the date of issuance and must include at least 3 participations, each associated with a different HECM,” the term sheet reads.
The new scheme will also allow for a variety of property valuation methods, including automated valuation models (AVMs) from approved vendors or price opinions from independent brokers, but it will bring these into the pool at 90% valuation.
An information blog written by Karan Kaul, Ginnie Mae’s senior policy adviser, said the move was intended to “protect Ginnie Mae in the event of a discrepancy between estimated property values and market values or future declines in home prices.”
Additionally, “qualifying HECMs must have an adjusted property value ratio of no more than 60%,” a requirement intended to “limit the amount that can be consolidated into HMBS 2.0” to “help limit leverage and provide additional risk mitigation” for tax purposes For people. The company noted that HECM eligibility applies to loans where the UPB is not less than 98% and not more than 148% of the loan’s Maximum Claim Amount (MCA).
Under the terms of HMBS 2.0, participating issuers will also be responsible for repurchasing loans from a specific pool when one of the following three situations occurs: when the outstanding loan balance reaches 150% of the MCA; when the loan is allocated to U.S. Department of Housing and Urban Development (Heads-up Display); or upon termination of HECM ticket.
“Accessing liquidity under HMBS 2.0 will give issuers time to resolve issues preventing HECM from being allocated to [the Federal Housing Administration (FHA)]”, Ginnie Mae said. “Such access will alleviate current liquidity pressures and reduce the likelihood of issuer defaults and portfolio liquidations, in which case Ginnie Mae would need to step in and extract benefits from insolvent issuers.” Take over the portfolio.”
Additionally, the company said the process is designed to increase investor confidence in the wider HMBS market and support existing HECM mortgage servicing rights (MSR) values.
HMBS 2.0 also aims to “provide issuers with an incremental servicing revenue stream to ensure that customer service operations can sustainably meet the needs of borrowers in need of assistance,” Ginnie Mae said.
At the NRMLA event, Valverde said it planned to launch HMBS 2.0 as an active product by the end of 2024.
Valverde and Ginnie Mae look forward to seeing the outcome of the consultation period with stakeholders and the public.
“Soliciting public input on the structure of the HMBS 2.0 scheme is critical to developing a plan that supports issuer liquidity while protecting taxpayers,” he said.
