Ginnie Mae, an arm of the Department of Housing and Urban Development, has released the final form of an alternative reverse-mortgage securitization vehicle that's had strong industry momentum behind it.
The final terms tweak some parameters and provide more definition for some aspects of the Home Equity Conversation Mortgage securitization alternative and some industry representatives are hoping it goes into active use.
The term sheet for the alternative mortgage-backed securities pooling vehicle is a "key component of launching an HMBS 2.0 program," said Steve Irwin, president of the National Reverse Mortgage Lenders Association.
"It is critically important that Ginnie Mae and the HMBS issuers now work toward getting this program implemented," Irwin added in an email sent in response to questions from this publication.
HMBS 2.0 aims to address financial strains caused by nonactive buyouts from Ginnie-guaranteed securitized pools of equity-withdrawal products taken out by borrowers 62 and up.
Buyouts occur when the outstanding balance of a loan reaches a certain percentage of the maximum claim amount, and when mortgages are nonactive and can't be assigned to HUD.
That's made managing buyouts costly for issuers, in some cases forcing lenders to hold them on financing lines for prolonged periods of time.
HMBS 2.0 gives issuers an option to pool these loans in a separate type of security and remove those assets from their balance sheet.
Final Ginnie Mae terms for the vehicle include an extension of the mandatory buyout threshold. It is now 150% of the maximum claim amount. A pooling participation cap aimed at minimizing taxpayer risk is 95%.
Certain loan advances can be securitized in HMBS 2.0 pools, including those related to due and payable loans, under the finalized terms.
Ginnie also tweaked pool certification requirements to address some hurdles around foreclosure and legal documentation when providing alternative property valuations.
Maximum adjusted property-value ratios will be as follows: 70% for loans bought out before the program's implementation and 60% for other HECMs.
The government securitization guarantor got the terms for the popular HMBS 2.0 program across the finish line ahead of a major change in federal leadership on Capitol Hill and just ahead of
"As my final major initiative at Ginnie Mae, I am proud to see the critical policy work completed," he said in a press release.
Various combinations of buyouts and pooling rules have challenged issuers across the universe of Ginnie-guaranteed mortgage securitizations.
The Community Home Lenders of America recently urged Ginnie to start working to address some liquidity issues in the traditional MBS market that have led to
Those concerns are intensifying due to the way pooling rules interact with
Ginnie Mae faces challenges in addressing these issues because it has limited resources and a payscale that make it difficult to compete for talent, Ted Tozer, the agency's former president, said in a recent interview.
HMBS 2.0 was a small-scale project relative to the changes that would be required to address the community lenders' concern.
"Liquidity is really the No. 1 risk factor but really Ginnie Mae can only work on one major project at a time," Tozer said.
"Ginnie Mae's list is going to get longer and longer and longer, unless they're actually allowed to grow," he added.
