The industry has been seriously concerned about the continued viability of Ginnie servicers, and now a solution is on the horizon. As 8 of the top 10 Ginnie servicers are non-banks, they function without many of the liquidity solutions available in the standard banking market. As such, when the federal government declares "forbearance for all," there were a lot of questions about who's paying for all this?
Ginnie loans, unlike Fannie and Freddie, have a unique structure using a scheduled remittance, meaning the investor gets paid even when the borrower doesn't make the payment. That isn't so bad when serious delinquencies are approximately 4% (a la 2019). But universal default? That wasn't in the model. The following Ginnie in Brief lays out the skeleton of a new "Pass-Through Assistance Program (PTAP) through which issuers with a P&I shortfall may request that Ginnie Mae advance the difference between available funds and the scheduled payment to investors."
Under the Ginnie Mae MBS program, the approved issuers who service mortgage-backed securities (MBS) are required to remit scheduled principal and interest (P&I) to investors, and make various other payments in connection with mortgage loans, even when monthly payments are not received from borrowers. Indeed, the cornerstone of our MBS Guaranty program has been and will always be that the investors who support access to affordable mortgage credit for the U.S. Department of Housing and Urban Development (HUD), the U.S. Department of Agriculture (USDA), and the U.S. Department of Veterans Affairs (VA) borrowers by purchasing Ginnie Mae securities will receive payments of principal and interest on time and in full.
Ginnie Mae fully anticipates implementing within the next two weeks, via an All Participants Memorandum (APM), a Pass-Through Assistance Program (PTAP) through which issuers with a P&I shortfall may request that Ginnie Mae advance the difference between available funds and the scheduled payment to investors. This PTAP will be effective immediately upon publication of the APM for Single Family program issuers, with corresponding changes made to Ginnie Mae’s MBS Guide in due course. We anticipate publishing PTAP terms for HMBS (reverse mortgage) and Multifamily issuers shortly thereafter.
More to follow on Ginnie Mae's PTAP facility.
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