The Mortgage Bankers Association (MBA) this week submitted a letter to congressional leaders in the U.S. House of Representatives and U.S. Senate, urging them to endorse full funding for Ginnie Mae in order to ensure maximum liquidity for the government-backed corporation’s mortgage-backed securities (MBS) issuers.
In addition to the MBA, signatories on the letter include the Community Home Lenders of America (CHLA), the Housing Policy Council (HPC), the National Association of Realtors (NAR), the National Association of Home Builders (NAHB) and the National Reverse Mortgage Lenders Association (NRMLA).
Broader aims
The content of the full letter, reviewed by HousingWire’s Reverse Mortgage Daily (RMD), calls for Ginnie Mae to receive full funding in alignment with its 2025 budget request of $67 million for the company’s salaries and expenses.
“Ginnie Mae plays a critical role in guaranteeing securities backed by Federal Housing Administration (FHA) loans, as well as Rural Housing Service (RHS) and Veterans Affairs (VA) single family loans,” the letter stated. “The FY 2025 budget request from the administration projects that Ginnie Mae will generate approximately $1.4 billion in profits (negative credit subsidies).”
Giving the company the “staff the agency needs to fulfill its responsibilities” will allow it to “focus on its core mission, including marketing Ginnie Mae securities to global investors and conducting oversight of the 300-plus companies that issue Ginnie Mae securities backed by FHA, RHS, and VA loans,” the letter read.
A broad base of MBS issuers is “vital to maintaining a competitive mortgage market and keeping mortgage costs as low as possible,” the letter read. “With the sustained increase in long-term mortgage rates, homeownership affordability is strained, which means that enabling ongoing liquidity for low-down payment FHA, RHS, and VA loans, as well as maintaining the competition created by a broad issuer base, is particularly critical.”
The letter addressed what officials believe are several potential objectives for Ginnie Mae to achieve with full funding. These include the development of expanded liquidity options that could maximize issuer participation while minimizing Ginnie Mae’s exposure and intervention when an issuer cannot meet advance obligations.
Reverse mortgage impacts
The reverse mortgage industry has unique stakes in the security of Ginnie Mae. This is to the importance of the Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) program to the business, as well as the expanded role the company has taken in the industry’s affairs since assuming the servicing operation of former lender Reverse Mortgage Funding (RMF) in 2022.
When reached by RMD, NRMLA President Steve Irwin laid out some of the specific needs of the reverse mortgage industry and why the association became a signatory on the letter.
“Liquidity strains and balance sheet distortions present unique challenges to NRMLA’s HMBS issuer members,” Irwin said in an email response. “With its limited resources, GNMA has been able to focus on these issues and has already provided significant relief to the HMBS Issuers. There are additional opportunities for GNMA to continue its strong work in the HMBS area, and they should be provided the requisite resources to ensure the further stabilization of the FHA-insured reverse mortgage marketplace.”
When making a case for expanded budget authority over the past several months, Ginnie Mae officials have contended that the addition of a sizable reverse mortgage portfolio, coupled with the need for issuer liquidity, have strained the company’s existing resources.
“The acquisition of the defaulted portfolio has left Ginnie Mae with an asset that continues to generate borrower draws,” the company said when justifying its budget request to Congress in March. “It is critical for Ginnie Mae to explore the benefits, and potentially establish the capability to securitize mortgages as part of its efforts to support liquidity in this market that remains under significant liquidity strain.”
Additional staff is also needed to continue the goal of stabilizing the HMBS market, Ginnie Mae stated. Of the $24.6 million in additional funding requested, $4.4 million would go toward the hiring of 19 additional full-time equivalent employees to more adequately manage the HMBS portfolio.
Looking ahead
At a recent reverse mortgage industry event hosted by NRMLA in Washington, D.C., Ginnie Mae acting president Sam Valverde told attendees that the company is aiming to roll out its plans for a new HMBS product — initially announced in January — by the end of 2024.
Valverde also estimated that sometime in June, a term sheet for the new HMBS product is expected to be released.
“Ginnie Mae remains committed to stabilizing the government reverse mortgage market,” Valverde told RMD last month in response to an inquiry about the product. “Our development of a new HMBS program is intended to ease liquidity pressures and help ensure that our Issuers have access to reliable and cost-effective capital markets funding.”
