Ginnie Mae updates MBS program risk parameters

Agency Rule-Making & Guidance Ginnie Mae MBS Mortgages

On January 25, Ginnie Mae issued an All Participant Memorandum (APM 18-02) announcing updates to multiple chapters of their MBS Guide. According to the memo, effective immediately, Chapters 3, 5, 9, 10, and 18 now provide expanded information about acceptable risk parameters for Ginnie Mae portfolios and applicable non-compliance consequences. Specifically, Chapter 3 is updated to include examples of violations of program requirements that Ginnie Mae considers outside of acceptable risk parameters, such as:

• “Rates of delinquency that are above the thresholds published in Chapter 18(3)(C) or that otherwise pose a risk to an Issuer’s responsibility to advance P&I payments to security-holders”;
• “‘Run-off’ portfolios, or business models that involve the recurring sale of substantially all the servicing created by issuance”;
• “Heavily-concentrated portfolios”; and
• “Recurring issuance of multi-issuer program packages that exhibit prepayment activity that is substantially different from that of comparable packages.”

Chapter 3 also includes examples of non-compliance restrictions that may be imposed, including but not limited to, requiring an Issuer’s portfolio to be recalibrated to fall within acceptable risk parameters.

Other MBS Guide updates include:

• Chapter 5. Expansion on risks associated with non-compliance of MBS program requirements, such as, (i) “denial of authority to issue additional securities;” and (ii) “the imposition of civil money penalties.”
• Chapter 9. Participation in a multiple Issuer pool is considered an event of non-compliance if Ginnie Mae has restricted, in writing, the Issuer’s ability to participate.
• Chapter 10. GinnieNET must be used for paperless electronic processing of pools submitted for immediate transfer of Issuer responsibility. Ginnie Mae reserves the right to reevaluate an Issuer’s participation in the Pools Issued for Immediate Transfer (PIIT) program based on compliance with Chapter 3’s applicable risk parameters.

Chapter 18. Failure to maintain delinquency rates may result in denial of participation in multiple Issuer pools, the PIIT program, and/or the imposition of additional financial obligations.