Ginnie Mae Actively Exploring Private Capital Risk Sharing and Changes to Treatment of MSRs

In remarks at SFIG Vegas 2018, Michael Bright, Acting Director of the Government National Mortgage Association (Ginnie Mae), detailed a number of initiatives underway. As reported in two pieces published in Inside Mortgage Finance, Ginnie Mae has been in active discussions with stakeholders concerning credit enhancement structures for FHA loans, according to an article. As detailed by Mr. Bright, “We are actively looking at structures we can put in place where we bring in private capital to provide a [partial] guarantee.” The theoretical arrangement would have private mortgage insurers assume much of the risk burden in lieu of the Mutual Mortgage Insurance Fund and Tax Payer exposure to mortgages.

Another potential change being contemplated, according to the piece, is a change to the existing pledge agreement that allows issuers to borrow against mortgage servicing rights (MSRs). According to Mr. Bright in the same speech, the intention would be to strengthen Ginnie Mae’s ability to oversee its issuer base, which has shifted from large regulated banks to mostly unregulated nonbanks. This increase in non-bank participation occurred after an exodus of large banks from the market given concerns regarding the government’s use of the False Claims Act (FCA) and the Financial Institutions Reform, Recovery, and Enforcements Act (FIRREA). SFIG has been in close talks with regulators and legislators concerning the FCA, FIRREA, and MSRs, and continues to monitor developments in all three carefully.

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