Ginnie Mae Approves Facility to Aid in Servicer Liquidity

Ginnie Mae announced Tuesday it has approved the inclusion of a facility to advance financing under its Acknowledgement Agreement program. 

The agreement states Ginnie Mae has permitted a Note Securitization (NS) structure, which was developed in 2016 and allows for the securitization of servicing cash flows through a trust. 

A release from Ginnie Mae says this structure has been “strongly supported” by institutional investors that lacked a vehicle for investing in mortgage servicing rights (MSRs). 

Five of Ginnie Mae’s top 11 issues—based on February issuance volume—use the NS structure. 

“Owning and servicing MSRs is a capital-intensive proposition, and the more avenues that exist for private capital to flow into the system on attractive terms, the easier it becomes to fulfill our mission of bringing global capital into the US housing market, while minimizing risk to the taxpayer,” said Ginnie Mae Principal EVP Seth Appleton. “We are pleased to have been able to finalize this transaction, because it represents another step forward in the improvement of the liquidity supply for the housing finance system.”

Outstanding financing under the NS structure exceeded $2 billion at the end of 2019, according to Ginnie Mae. 

Ginnie Mae previously announced plans to create an All Participants Memorandum (APM) to address liquidity issues related to the impacts of COVID-19. 

The program is called a Pass-Through Assistance Program (PTAP) and lenders with a P&I shortfall may request Ginnie Mae advance the difference between available funds and the scheduled payment to investors. 

“This PTAP will be effective immediately upon publication of the APM for Single Family program issuers, with corresponding changes made to Ginnie Mae’s MBS Guide in due course,” a release says. “We anticipate publishing PTAP terms for HMBS (reverse mortgage) and Multifamily issuers shortly thereafter.” 

Ginnie Mae states the advancement of funds by the agency to an issuer as a result of disaster declaration by the President of the United State would be considered an “event of default” under its programs. 

Issuers will be required to sign an agreement with Ginnie Mae and must repay the advance between a specific time period.

Ginnie Mae said borrowing under the PTAP should be a “last resort” to alleviate the liquidity shortage faced by issuers of Ginnie Mae.