Ginny Mae has taken a much more active role in the reverse mortgage industry over the past two years, following the bankruptcy of a major industry lender, which threatened liquidity for other major players in the space. The state-owned company has long overseen the Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) program, which securitizes reverse mortgages and sells them to investors.
While the industry’s recent liquidity issues were first addressed under the leadership of former Ginnie Mae President Alanna McCargo, the company’s acting president, Sam Valverde, is currently charged with leadership responsibilities. These include the eventual implementation of “HMBS 2.0”, an additional program that the industry is watching with great interest.
To get a sense of where things stand with Ginnie Mae’s recent reverse mortgage activity: HousingWire‘s Reverse Mortgage Daily (RMD) spoke with Valverde for an exclusive interview.
Small size, big importance
When asked about his own interactions with the reverse mortgage program and some of the initiatives he oversees, Valverde acknowledged the program’s importance in achieving the company’s mission.
“HMBS is a small part of our portfolio, but it is a critically important part of how we achieve our mission,” he said. “Ensuring this critical retirement tool remains available to America’s seniors is not just Ginnie Mae’s priority – it is a shared priority between us, the Federal Housing Administration (FHA), the U.S. Department of Housing and Urban Development (HUD) in general, and our industry partners. It is more important than ever as our population continues to age and more seniors will need a way to supplement their income without becoming displaced.”
Similar to recent comments from FHA Commissioner Julia Gordon, Valverde has supported the idea that the industry’s demographics have the potential to expand the base of reverse mortgage business.
“I think the growing demographic need for this program indicates that there is new demand on the horizon that could support the future growth of the program, if we can stabilize it in the near term,” he said. “At Ginnie, we made addressing the issues facing the reverse mortgage industry a critical priority, even as we faced limited resources. It remains a priority for the future.”
Collaboration within the sector, actions taken
When asked about Ginnie Mae’s collaboration with members of the reverse mortgage industry, Valverde said the shared work has been productive.
“[The industry has] have been our partners in the program – both overall and in developing our response,” he said. “Our issuers originate and aggregate the mortgages; Ginnie Mae can’t do that. We don’t serve consumers directly, so we rely on our issuers.
“As the interest rate environment accelerated RMF’s bankruptcy, it became clear that we needed to take action to maintain the viability of the program for senior borrowers, while ensuring that RMF borrowers were not negatively impacted. We started focusing on multiple issues facing the industry.”
The first priority was the liquidity of the tail funding, to ensure that issuers could continue to honor borrowers’ drawdown requests. That work began in October 2023, but there was also a need to address the liquidity constraints that older HECM loans placed on issuers.
“This year we really started working with FHA, and they’ve also done a lot to support issuer liquidity,” he said.
FHA has reduced occupancy defaults by offering residents the opportunity to certify occupancy through an alternative means. It also made it easier to request credit allocations earlier, while allowing servicers to resolve defaults more quickly by increasing incentives for borrowers, their heirs and servicers. But more work was needed, and that’s where HMBS 2.0 comes into the fold.
“Even with all this great work from FHA, it was clear that more needed to be done,” Valverde said. “So we started exploring a new securities program – what we and the industry are calling ‘HMBS 2.0’. That’s why we’ve consulted closely with issuers and industry experts to identify market needs and get their input.”
For more from Sam Valverde on reverse mortgages and HMBS 2.0, look for HousingWire’s RMD soon.
