FHFA, Ginnie Mae Announce New Financial Eligibility Requirements for Sellers and Servicers
Written By: Joel Palmer, Op-Ed Writer
The Federal Housing Finance Agency (FHFA) and Government National Mortgage Association (Ginnie Mae) announced updated minimum financial eligibility requirements for seller/servicers and issuers.
There are key areas that differ from Ginnie Mae’s proposed requirements released in August 2021, and FHFA’s proposal from February 2022.
FHFA initially released Servicer Eligibility 2.0 proposed requirements for public input in January 2020. The 2020 proposal was intended to strengthen the enterprises’ seller/servicer eligibility requirements and provide transparency and consistency of capital and liquidity required for non-depository seller/servicers.
Specifically, the 2020 proposal focused on improving the previous requirements by incorporating cost and risk assumptions that were not previously considered and re-evaluating modeling assumptions and inputs, given changes in the servicing environment.
The 2020 proposal was shelved due to the COVID-19 pandemic. FHFA decided to assess and re-propose minimum financial eligibility requirements based on lessons learned from market events in reaction to the pandemic.
One area where this month’s requirements are more relaxed than the February 2022 proposal is origination liquidity for non-depository mortgage originators that originate more than $1 billion in single-family first lien mortgages in a four-quarter period.
In the February proposal, FHFA established a liquidity requirement of 2 percent of the seller/servicer’s outstanding to-be-announced (TBA) hedging position, in the case of a non-depository seller/servicer that originates 1-4 unit single- family mortgage loans.
FHFA said this proposed requirement was designed to address the higher risk exposure to a seller/servicer. The 2 percent threshold represented a stress movement in MBS prices in March 2020 (during the pandemic market stress), which FHFA observed as a market-based approximation of the level of liquidity needed to cover such stress events.
Instead of 2 percent, the new requirement will be 50 basis points.
Also, the February proposal sought to raise the minimum capital ratio of 9 percent on all non-depository seller/servicers, whereas the final requirements kept the ratio at its current 6 percent.
FHFA and Ginnie Mae said they worked closely to align their standards and implementation guidelines to “reduce regulatory burden and provide greater consistency and predictability for seller/servicers and issuers.”
The majority of the requirements are effective on September 30, 2023. Most of the earlier changes proposed in February were set to take effect in December of this year.
“The updated eligibility requirements represent an ongoing commitment to the safety and soundness of Fannie Mae and Freddie Mac by strengthening the capacity of seller/servicers to meet the financial responsibilities associated with doing business with the enterprises,” said FHFA Director Sandra L. Thompson. “FHFA and Ginnie Mae’s effort to coordinate on financial eligibility requirements provides greater consistency for enterprise seller/servicers and Ginnie Mae issuers.”
“Ensuring that Ginnie Mae issuers can acquire financing during times of stress is critical to preserving access to credit for those borrowers who depend on Ginnie Mae and our insuring agency partners,” said Ginnie Mae President Alanna McCargo. “These enhanced requirements, the product of our historic collaboration with FHFA, will promote the resilience of our issuers and better enable them to operate throughout economic cycles.”
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
