Reverse mortgage and broader industry groups are eager to see Ginnie Mae finalize
Associations representing both constituencies say there are only a few operational details remaining to hammer out on the Home Equity Conversion Mortgage proposal.
Some HECM lenders, including
"It's very important that we get this program across the finish line as it will promote stability and growth in the HMBS marketplace, and will certainly relieve liquidity pressures," said Steve Irwin, president of the National Reverse Mortgage Lenders Association.
Ginnie buyouts occur when the outstanding balance of a loan reaches 98% of the maximum claim amount, and when mortgages are nonactive and cannot be assigned to the Department of Housing and Urban Development.
(The maximum claim amount is the lower of the home's value or the local Federal Housing Administration limit.)
Due to interest rate conditions and the composition of the market in recent years, the volume of loans hitting their MCA has been high and managing buyouts has been costly for issuers, in some cases forcing lenders in holding them financing lines for prolonged periods of time.
All of this explains why the industry has been eager to have an option to pool these loans in a separate type of security, allowing them to remove their loans from their balance sheets.
To get a sense of one of the few remaining details that need to be hammered out for this to happen, consider that Ginnie wants issuers to sell 95% participations into HMBS 2.0 with a 5% risk retention piece. The participation in a traditional HMBS is 100%.
Because the Ginnie market has never contemplated 95% participations before, its systems aren't set up to accommodate them
"We have offered up some alternative methods which might satisfy that risk retention effort," Irwin said.
The industry and Ginnie also are working on how to address incomplete paperwork that exists in some buyouts in ways that would make investors comfortable.
"Our HMBS issuer committee gathered and worked diligently on crafting suggestions that might resolve these types of concerns," said Irwin.
The Mortgage Bankers Association said it submitted a joint letter with the reverse mortgage lenders' trade group on HMBS 2.0 and deferred to the latter group for comment.
Their willingness to work together suggests there's unusually strong industry support for HMBS 2.0, said Michael McCully, partner at New View Advisors. (NVA is a reverse mortgage advisory firm focused on capital markets, product development, valuations, acquisitions and investment.)
"The industry coming together to work as a unified voice is no easy undertaking. You have a lot of strong opinions within the broker-dealer community and among the larger HMBS issuers. So for everyone to work together to come up with one unified comment letter is significant," he said.
