After initially announcing in January a program to develop a new Home Equity Conversion Mortgage (HECM)-backed securities (HMBS), the government-owned company Ginnie Mae The agency, which oversees the government’s mortgage-backed securities (MBS) portfolio, released a highly anticipated “HMBS 2.0” term sheet this week.
To better understand the newly proposed plan and what it hopes to achieve, house lineReverse Mortgage Daily (RMD) sat down with a Ginnie Mae official to learn what the organization hopes to accomplish with the new program and what stakeholders are expected to contribute during the comment period. and industry liquidity conditions.
Liquidity and Hope of HMBS 2.0
The official explained that while liquidity conditions have improved “significantly” over the past few years, liquidity pressures remain a reality in the HMBS market, which is what HMBS 2.0 is designed to address.
The official said Ginnie Mae understands that the reverse mortgage industry is highly sensitive to interest rate changes and that the development of a program like HMBS 2.0 could be a meaningful development in a future high-rate environment.
The official said the plans currently in place were designed for long-term liquidity benefits, but the amount of mandatory acquisitions expected for the HMBS pool over the next 12 months was not small. Issuers continue to rely on private label securitizations (PLS), and the execution of PLS remains relatively fragile.
That’s why HMBS 2.0 has the potential to “provide more confidence in the financing of those older, older mortgages once we implement the scheme,” the official explained. Addressing the issue now, rather than leaving it to other future Ginnie Mae leaders, could also alleviate structural challenges.
Reverse Mortgage Industry Partnership
An important partner in developing HMBS policy is the reverse mortgage industry itself. Ginnie Mae recognizes that working with businesses and associations such as National Reverse Mortgage Association (NRMLA), the official said.
They added that the reverse mortgage industry has generally been “indispensable” in helping Ginnie Mae think through the HMBS issues that have arisen over the past few years. Individual reverse issuers and the NRMLA also helped provide important background information and identify issues in the area.
NRMLA has made proposals similar to HMBS 2.0 in the past, so knowledge of the association’s issuer membership remains a valuable secondary resource for Ginnie Mae. But at the end of the day, the company is most interested in getting as much substance back as possible and encourages any stakeholders who submit comments in the meantime to follow the new term sheet as a whole.
Among some of the issues Ginnie Mae is seeking feedback on, the company wants to ensure that the proposed HMBS 2.0 is not overly complex for issuers themselves and that the proposal is actionable for them. The company also wants feedback from market makers, but it doesn’t often deal with market makers.
The company also wants to ensure HMBS 2.0 can accommodate as much HECM collateral as possible, but it is seeking full feedback on the entire document over the next 30 days.
“Different elements of the term sheet interact with each other, so we are seeking comment on all of them,” the official said.
Practicality of HMBS 2.0
Ultimately, Ginnie Mae is looking to provide more utility to the HMBS market. The official explained that if the plan is implemented, HMBS 2.0 will be seen as a vehicle for “superior pricing and monetization of HECM asset balances relative to the private finance market.”
The company believes that offering additional financing options through Ginnie Mae guarantees will be attractive.
“In general, we hope to have more investment participation,” the official said. “We believe it’s important to have the Ginnie Mae label to put these things on the table.”
This makes the active participation of stakeholders during the consultation period even more important, as this will help Genie finalize the design of the plan and commit to its implementation.
