Ginnie Mae may soon raise its liquidity and cash requirements for independent mortgage banking firms since it seems almost certain that Congress won't increase the agency's budget for fiscal year 2016.
Independent mortgage banks have become major issuers of Ginnie Mae mortgage-backed securities while some banks have backed away from the MBS program.
"We don't want to create mission conflicts, but Ginnie Mae has to do something," Ginnie President Ted Tozer said Monday at a Ginnie Mae conference in Crystal City, Va.
Tozer has welcomed mortgage bankers into the program but now he is concerned his agency does not have the resources to properly monitor the financial condition of independent mortgage banks, which don't have standard financial structures like banks.
In an interview, Tozer said independents have widely different financial structures. "We have to make everything cookie cutter. We don't have the staff to do anything differently."
The main issue facing independents is that they have plenty of capital in the form of mortgage servicing rights. However, they can run out of cash when they have to pay MBS investors principal and interest on delinquent mortgages.
The agency requested a $5 million budget increase for fiscal year 2016 which starts Oct. 1. But it has been denied. That leaves Ginnie Mae with a $23 million budget to oversee a growing MBS portfolio that is likely to hit $1.6 trillion next month.
"It seems shocking that Congress doesn't understand this is the engine that is really putting money back into the housing sector," he said. "We are possibly going to have to slow down these independent mortgage banks over a few million dollars."
Ginnie Mae Senior Vice President Michael Drayne has been instructed to come up with recommendations to address the monitoring and budget issues. His mission is to see where Ginnie can free up resources so they can be used in other areas.
"We have to step back and look at how do we protect the MBS platform and protect the guarantee and get as much through the system with the limited resources available," Tozer said.
He expects to discuss the changes further at the Mortgage Bankers Association's annual conference in October.
