Ginny Mae this week released its fiscal year 2024 financial report, detailing how the company has sought to provide liquidity to the mortgage industry, provide access to affordable housing and deliver value to American taxpayers. While housing advocates continue to call for full financing of the company Congressthe company also highlighted the work it has done this year for the reverse mortgage industry.
Ginnie Mae oversees the Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) program, which came under severe pressure in late 2022 with the collapse of a major reverse mortgage lender. But the company wanted to address the liquidity issues by initiating work that would culminate in a new, complementary HMBS program that the company and the reverse mortgage industry are calling “HMBS 2.0.”
Activity to improve liquidity
The new supplemental program was mentioned several times in Ginnie Mae’s annual report as evidence of the work the company is doing to improve liquidity and market participation.
“In an effort to broaden the eligible population and reinvigorate the power of the HMBS program, Ginnie Mae published a proposed term sheet for a new reverse mortgage, HMBS 2.0, and provided a public comment period for feedback from industry stakeholders.”
After publishing an initial term sheet over the summer, a final term sheet was published last month. The report details what the company views as its priorities in pursuing a complementary reverse mortgage securities program, which includes its overall commitment to the reverse mortgage industry.
“Ginnie Mae is focused on supporting issuer liquidity to ensure a resilient and sustainable housing finance system and ensure borrowers have access to affordable credit throughout economic cycles,” the company said in a forward-looking section of the report . “Through collaboration with cross-agency and industry partners, Ginnie Mae will work to identify potential solutions that support this goal. One such project is HMBS 2.0.”
The company is committed to “maintaining a well-functioning HMBS program that meets the needs of older Americans,” the report said, and it will continue to work with its partners and industry stakeholders to facilitate access to liquidity .
“We believe the path we are on, in collaboration with industry stakeholders, will play an important role in improving the HMBS program,” the report said. “The proposed changes will provide issuers with greater access to liquidity and lead to a more robust HMBS market.”
Original HMBS and 2.0 program work
In addition to the development work devoted to HMBS 2.0, the report also details ongoing work in the original HMBS program.
“In [September] In 2023, Ginnie Mae updated the existing HMBS requirements in the guide to allow for multiple securitizations of borrower advances or withdrawals in the same month,” the company explained. “The improvement reduced the time that additional holdings had to be held and was intended to alleviate short-term liquidity pressures on issuers.”
HMBS issuance data over the past year shows that there has been a steady stream of securitizations under this change. Additionally, there was a change in early 2023 that reduced the minimum size requirement for all types of HMBS pools from $1 million to $250,000.
This latest measure has helped to “marginally improve liquidity for the HMBS issuers that use it,” New viewing advisors partner Michael McCully said HousingWire‘s Reverse Mortgage Daily (RMD) in October.
HMBS 2.0, if implemented, would also “provide a new type of securitization pool to enable re-securitization opportunities for active and inactive buyouts,” which “would aim to further support mortgage lenders’ reverse liquidity in this challenging environment.”
HMBS 2.0 could also have potential implications beyond the reverse mortgage industry. In a recent early buyout (EBO) proposal submitted to Ginnie Mae by the Association of Mortgage Bankers (MBA), a white paper outlining the proposal, said HMBS 2.0 could provide guidance on the potential implementation of a similar program for the term mortgage market.
“We believe that the rollout of the new HMBS 2.0 program could provide a logistics template for Ginnie Mae’s workforce as they establish the conditions and criteria for a potential rollout of an EBO securitization product,” the MBA said paper.
