Residential Credit Solutions, Inc. (RCS) has just received approval from the Government National Mortgage Association (Ginnie Mae to be an issuer and servicer for the Ginnie Mae I and II single-family mortgage-backed securities programs.
Dennis Stowe, president and CEO of RCS, says the nod from Ginnie Mae will allow the company to provide assistance to a broader constituency of homeowners by expanding its servicing and sub-servicing offerings to both investors and issuers of federally insured and guaranteed loans.
RCS is a national mortgage investment and servicing company and Stowe sees opportunities for both sides of RCSÃ¢â‚¬â„¢ business opening up with the Ginnie Mae venture.
With the market ups and downs over the last couple of years, he says Ã¢â‚¬Å“there are definitely Ginnie Mae securities out there that have higher delinquencies than others and have at-risk borrowers.Ã¢â‚¬Â
While some larger servicers arenÃ¢â‚¬â„¢t equipped to handle the distress, particularly extended periods of it, specialty servicers such as RCS were built precisely for this purpose. Stowe says his company is well positioned to step in and sub-service for banks to help them contact the borrower, modify and reinstate the loan, and get the borrower back to performing status.
This sub-servicing relationship can help lenders improve their ranking with the Federal Housing Administration (FHA) and avoid landing on the agencyÃ¢â‚¬â„¢s Neighborhood Watch list, reserved for those whose delinquency and default ratios fail to align with those of peer lenders.
The need for default management with a specialty touch will be high for several years to come, according to Stowe, despite the fact that newly originated loans pose a much lower credit risk.
The FHA has made it possible for many homeowners to refinance and has been an integral part of the housing recovery, Stowe says. However, he notes that with unemployment still high and housing prices flat at best, there likely will continue to be opportunities for firms such as RCS, which has experience in managing at-risk mortgages, to assist FHA with its new-issue portfolio over the next few years.
RCS is also looking at purchasing delinquent FHA loans out of Ginnie Mae securities, restoring performance levels, and then repackaging the reinstated loans as new securities, whether through its own issuance or as a co-investor.
Ã¢â‚¬Å“There are some fairly large firms that see this as an attractive opportunity,Ã¢â‚¬Â Stowe said.
RCS also has its sights set on mortgage servicing rights (MSRs). With the recent changes in the landscape of the correspondent business, Stowe believes there are opportunities to grow the companyÃ¢â‚¬â„¢s portfolio through the acquisition of newly originated mortgage servicing rights (MSRs) on Ginnie portfolios.
Ã¢â‚¬Å“A lot of the sellers out there right now have very limited choices on who to sell their product to,Ã¢â‚¬Â he explained. Ã¢â‚¬Å“Servicer leased premiums have been under pressure [and] with a lot of people exiting the market, there may be an attractive opportunity to build a portfolio of servicing on Ginnie Mae securities.Ã¢â‚¬Â
For all practical purposes, Stowe says most of the loans insured by FHA and securitized by Ginnie Mae have an LTV ratio of 100 percent and are in markets where home prices are fairly flat making it difficult for borrowers to exit the property without a loss.
The ability to help borrowers stay in these homes will be important as the industry moves forward, even on newly originated loans, Stowe says.
RCS currently manages approximately $5 billion in performing and nonperforming residential mortgage loans. The company is headquartered in Fort Worth, Texas, with offices in Los Angeles and New York.