Ginnie Mae's new capital rules draw split opinions

While Ocwen and smaller players have shown concern about the impact of new risk-based capital requirements Ginnie Mae plans to add by the end of next year, others publicly traded companies may not, according to a new Keefe, Bruyette & Woods report.

"We believe all other mortgage originators/servicers in our coverage universe have excess capital and will not be materially impacted by the new capital rules," Bose George, Michael Smyth and Thomas McJoynt-Griffith, analysts at KBW, said in a Flash Note published Monday.

The analysts' assessment is in line with preliminary comments at least one other publicly traded mortgage company made regarding an earlier version of the proposal with a higher required ratio. Mr. Cooper executives said at the time that they did not expect it to hurt the company's business. 

Also on Monday, the Community Home Lenders Association wrote a letter to Ginnie, renewing its request that the government bond insurer "exempt small and mid-sized independent mortgage banks" from this aspect of updated counterparty criteria released recently in conjunction with the Federal Housing Finance Agency. (The FHFA does not have an equivalent of Ginnie's risk-based capital rule.)

The two agencies have some exemptions in their rule sets for smaller players, but the association would like them to go further, so that only the top 10-15 players would be subject to the RBC requirements.

The CHLA said that's because it remains concerned that the risk-based capital rule could thin the ranks of community lenders working with Ginnie, an arm of the Department of Housing and Urban Development that insures securitizations of mortgages that other government entities back at the loan level.

"We continue to believe that imposing bank-like requirements on smaller issuers is unnecessary, inappropriate, and likely to reduce the number of issuers," the group said in its letter. "The resulting increase in market concentration would reduce access to credit for minority and other underserved borrowers and increase risk for Ginnie Mae."

Ginnie Mae does use some calculations for its nonbank capital requirements that differ from those used by banks, but critics say more allowances should be made for differences between the two constituencies.