Ginnie Mae flags IMB outliers, TPP delinquencies, Show Me risk

"Recent changes to the loss-mitigation waterfall in the FHA and U.S. Department of Veterans Affairs (VA) channels have increased exposure for certain firms. Some companies, he said, acquired risk-layered portfolios with lower credit scores, higher debt-to-income (DTI) ratios and elevated loan-to-value (LTV) ratios assets that can become difficult to finance or sell in stressed markets. That's something we are keeping a careful eye on, Gormley said."

"Ginnie Mae has strengthened its oversight capabilities over the past decade through investments in technology, staffing and surveillance systems. We've made a lot of investments in technology over the last decade, and in human capital as well. Our surveillance tools have improved; it's easier for us to see into that activity earlier on, Gormley said."

"Ginnie Mae typically requires issuers to keep delinquencies at 5% or less of their portfolio. But changes to trial payment plan (TPP) loans were putting some issuers at risk of breaching these thresholds. An internal analysis showed that almost the entire recent uptick in FHA delinquencies could be ascribed to loans in TPP status. In response, Ginnie Mae in April temporarily removed TPP loans from delinquency calculations a policy Gormley expects will remain in place for a while."

"To bolster servicing liquidity, Ginnie Mae is accelerating a loan-level transfer initiative. Currently, issuers create pools that can range from a handful to thousands of loans. But once these pools are issued, Gormley said, there are limited circumstances when a loan would come out including early termination, payoff, or if the loan is bought out because it becomes seriously delinquent. We've been working on an initiative to allow loan-level transfers in the program, and it's something we've been increasing the velocity of change on over the last year, he said."

Recent changes to the FHA and VA loss-mitigation waterfall increased exposure for certain firms. Some companies acquired risk-layered portfolios with lower credit scores, higher debt-to-income ratios, and elevated loan-to-value ratios, which can be difficult to finance or sell during stressed markets. Ginnie Mae strengthened oversight over the past decade through investments in technology, staffing, and surveillance systems, improving early detection of issuer activity. Ginnie Mae typically requires issuers to keep delinquencies at 5% or less of their portfolio. Changes to trial payment plan loans put some issuers at risk of breaching delinquency thresholds, and internal analysis attributed nearly all recent FHA delinquency increases to loans in TPP status. In April, Ginnie Mae temporarily removed TPP loans from delinquency calculations, expected to remain in place for a while. Ginnie Mae is also accelerating a loan-level transfer initiative to bolster servicing liquidity, though modernizing technology remains a primary hurdle.

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