Ginny Mae Speaking at the conference, Acting President Sam Valverde said the company aims to launch a new Home Equity Conversion Mortgage (HECM) Backed Securities (HMBS) product program by the end of the year National Reverse Mortgage Association (NRMLA) The Eastern Regional Conference will be held in Washington, D.C. on Wednesday. The news was first reported by Inside Mortgage Finance.
Valverde reportedly told attendees during his keynote speech that the state-owned company was “notoriously opaque” and wanted to sensitize the reverse mortgage market on its new product plans.
The news was reportedly met with applause from attendees.
The company is developing a policy and implementation plan for the tool and plans to launch a term sheet that will include a 30-day public comment period expected to take place sometime in June. Valverde reportedly said that the plan is expected to start at the end of this year, but it could be earlier.
RMD reached out to representatives for Ginnie Mae but did not receive an immediate response.
NRMLA President Steve Irwin told RMD the association looks forward to working with the company on the development.
“NRRMLA is pleased to hear that Ginnie Mae will be releasing some details about its potential HMBS 2.0 plans for public comment, and our HMBS Issuer Committee looks forward to reviewing this information once the comment period opens,” Irwin said.
Ginnie Mae first said in January that it planned to develop a new HMBS product, known colloquially as “HMBS 2.0” by industry participants. According to Ginnie Mae’s preliminary announcement, this will make it possible to obtain loans from the HMBS pool above the existing 98% maximum claim amount (MCA) requirement.
When a HECM loan reaches 98% of its MCA, current rules provide that the issuer or investor must purchase the loan from its HMBS pool as a stability assurance measure for the wider HMBS program. By exploring a new product that would allow higher balance loans to be part of new securitizations, Ginnie Mae aims to add more stability to the secondary reverse mortgage market after facing severe liquidity challenges in 2023 .
In an accompanying statement, Ginnie Mae’s then-president Alanna McCargo made it clear that this new reverse mortgage-backed security would be a complement to the current HMBS program, not a replacement it.
“Ginnie Mae remains committed to the HMBS program, which supports an important tool that enables seniors to tap into their home equity,” McCargo said in January. “This potential product exploration reflects our concern about the current liquidity issues affecting the secondary mortgage market.”
Upon learning of the product’s development, former Ginnie Mae president Ted Tozer applauded the move, saying “one of the things that is urgently needed is to have this liquidity facility so that lenders – when When they buy ninety-eight percent of their loans from a pool of money — they can actually turn around and use them again as collateral to get government-guaranteed security, Tozer said in a paper he wrote for Science. Similar suggestions were made in this paper. urban institute end of last year.
The HMBS program has proven to be a challenge for the state-owned company since Ginnie Mae took over the HMBS portfolio. reverse mortgage financing (RMF), which ceased new business in late 2022 and ultimately declared bankruptcy and ceased operations.
Last year, Ginnie Mae implemented significant changes to the HMBS program, including lowering the minimum size required to create an HMBS pool to help smaller issuers, while also changing certain pool eligibility requirements to alleviate some of the liquidity constraints.
In November 2023, HUD’s Office of Inspector General (OIG) said the HMBS portfolio would pose a “significant risk” to Ginnie Mae in 2024, primarily due to the interest rate sensitivity of HECM loans. HUD OIG also announced earlier that it was investigating RMF’s withdrawal from the HMBS program as the government aims to defend Ginnie Mae in a lawsuit filed by one of RMF’s former creditors.
This story will be updated once comment is received from Ginnie Mae.
