The National Reverse Mortgage Lenders Association (NRMLA) and the Mortgage Bankers Association (MBA) have submitted a joint letter to Ginnie Mae acting president Sam Valverde, offering their thoughts and perspectives on the government-owned company’s proposed supplemental Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) program.
That program, referred to by industry participants as “HMBS 2.0,” was initially announced as in development at the beginning of the year. A term sheet detailing its proposed provisions was released at the end of June, with a 30-day comment period following. A Ginnie Mae official previously told HousingWire’s Reverse Mortgage Daily (RMD) that they looked forward to absorbing industry feedback on the proposal.
The letter largely commended Ginnie Mae for developing this program in response to the liquidity crunch brought about by the late 2022 failure of Reverse Mortgage Funding (RMF), a top 10 lender and a leading HMBS issuer. The trade groups told Valverde of their hopes that submitted comments could “hopefully even further strengthen and clarify key terms and provisions” of HMBS 2.0, according to a copy of the letter obtained by RMD.
The recommendations outlined in the letter include the implementation of a 100% pooling maximum participation rate with a 5% risk retention requirement. The associations say this further aligns the new program with provisions of the existing HMBS program, while a 5% risk retention requirement would also align it with provisions of the Dodd-Frank Act for nonagency securitizations, the letter explained.
NRMLA and MBA also requested that the definition of “participation” in the Ginnie Mae mortgage-backed securities (MBS) guide be updated for transparency and aligned with the U.S. Department of Housing and Urban Development (HUD)’s HECM model loan agreement.
The letter also seeks to adjust pool certification requirements to “address legal and operational considerations,” according to the MBA. This could better address the unique attributes of HMBS 2.0 when compared with the existing HMBS program, particularly since HMBS 2.0 pools will not be assignable to HUD.
“If implemented, the proposed program could alleviate liquidity constraints for HMBS issuers by facilitating the re-pooling of active and non-active buyouts into new custom, single-issuer pools,” MBA said of its outlook on the new program. “HMBS 2.0 will permit the pooling of HECMs with an outstanding unpaid principal balance (UPB) of no less than 98 percent and no greater than 148 percent of the Maximum Claim Amount (MCA).”
MBA advised its members to continue offering perspectives on the proposed program.
“MBA encourages HMBS Issuers to continue sharing their feedback on the structure of the HMBS 2.0 program as Ginnie Mae decides the next steps,” MBA wrote in an advocacy update issued on Monday. “This collaborative effort is essential in crafting a program that bolsters issuer liquidity while protecting taxpayers’ interests.”
Leading up to the letter, NRMLA President Steve Irwin previously told RMD that the association’s HMBS issuer members were contributing to the requested comments, and he relayed a lot of optimism about the company’s proposal.
“We know how limited their resources are at Ginnie Mae, and I think this speaks volumes to their dedication to the mission of the HECM program and its importance, not only to HUD but to Ginnie Mae as well,” Irwin said last month.
Ginnie Mae has detailed multiple times over the past couple of years that its resources have been strained by its assumption of the former RMF servicing portfolio. It remains one of the largest portfolios in the HMBS program despite Ginnie Mae not issuing any pools from it. The detail intensity of the HMBS program has required Ginnie to bolster its staffing to handle the portfolio and to request additional funds from Congress in the next fiscal year.
That request was approved recently by a Senate committee, but it remains to be seen how far it will go in both houses of Congress.