Ginnie Mae adding new financial reports for mortgage banks

A Department of Housing and Urban Affairs agency that serves as a mortgage-backed securities guarantor is adding a new reporting requirement that nonbank MBS issuers will have to fulfill during certain months next year, and potentially more regularly thereafter.
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The new "short form" will be available through an online portal that the guarantor, Ginnie Mae, has for independent mortgage bankers. The report pertains to entities that are not overseen by bank and credit union regulators and have more than $50 million in outstanding Ginnie MBS. The form is unaudited but must identify a certifying individual by name. That can be the CEO, chief financial officer or an equivalent executive. Ginnie also could request more formal certification.

The new form becomes mandatory starting in April 2024, with the reporting due for that month on May 31, and it adds to expanding requirements for nondepository issuers, who also have a risk-based capital rule becoming effective at the end of next year. The new reports will be required for May, July, August, October, November of next year in addition to April. They'll also be required in January and February in 2025, and going forward.

Some nonbanks have protested some of the additional oversight responsibilities imposed on them by Ginnie, in particular the pending capital rule's high risk weight for mortgage servicing rights, which can be subject to volatile swings in valuation. Ginnie provided a longer runway than originally planned to give them time to adjust.

"These reports may be useful to the GSEs and Ginnie Mae during a time of potentially heightened market stress. However, MBA is concerned about ever increasing regulatory burdens on IMBs and banks alike that continue to add to consumer costs," said Pete Mills, senior vice president of residential policy and engagement at the Mortgage Bankers Association, in an email.

Ginnie Mae President Alanna McCargo called the new reporting requirement for mortgage bankers "a critical step toward counterparty financial transparency.

"This enhancement advances our work in managing risk and ensuring the Ginnie Mae MBS ecosystem is sustainable and stable, through all economic conditions and market cycles," she added. 

Ginnie's interest in applying more oversight to nonbank issuers is a long-running trend predating McCargo's time at the agency, hearkening back to when the composition of its issuer base shifted away from depositories and grew during the years leading up to 2018.

An additional impetus of greater oversight of nonbank mortgage companies has come from the consolidation seen in the sector more recently due to a fast runup in interest rates after a long period of low financing costs. This resulted in a need to quickly downsize origination units.

Exemplifying the counterparty risk caused by those concerns, albeit in a unique niche, was the bankruptcy of Reverse Mortgage Funding, which resulted in a situation where Ginnie Mae needed to seize its servicing.

HUD's inspector general has launched an investigation into the circumstance, in which a warehouse lender has launched a related private legal challenge. Ginnie has not responded to requests for comment on these issues, but the situation appears to add to the impetus Ginnie has to keep closer tabs on its counterparties' finances.

Ginnie's large government-backed MBS market is a key funding vehicle for mortgages backed at the loan level by other agencies that serve first-time homebuyers, and as such it supports an important market for lenders, particularly given current interest rate conditions.

Access to Ginnie's newly required electronic document will be available to issuers upon request by emailing the administrator of the Mortgage Banking Financial Reporting Form portal at administrator@mbfrf.org, according to the agency.