This story originally appeared in the July edition of DS News
Seth Appleton was designated as Principal EVP of Ginnie Mae in October 2019 by HUD Secretary, Dr. Benjamin Carson. In this role, he is focused on bringing global capital to U.S. government mortgage loan programs by maintaining a liquid and attractive security for investors, modernizing the Ginnie Mae platform, and operating a fiscally sound program that minimizes risk to taxpayers.
Previously, he was HUD’s Associate Deputy Secretary and was HUD’s Acting Assistant Secretary and General Deputy Assistant Secretary for Congressional and Intergovernmental Relations.
What are the steps Ginnie Mae leadership took to create the Pass-Through Assistance Program?
It was really a study in teamwork and collaboration from everybody from the Secretary on down here at HUD and at Ginne Mae; it really came together quickly. We took stock of the situation that was emerging in the market due to the COVID-19 emergency, and really had four key objectives in mind as we developed a solution. One, we want to ensure the continued flow of principal and interest to our investors, because, after all, we are a full faith and credit guarantee program at our core. We wanted to support the forbearance policies that are ensuring and guaranteeing agencies, which are VA, HUD, and USDA. We wanted to mitigate servicing disruptions to our borrowers, of course, and we want to minimize risk to taxpayers. And so those were the four key objectives that we identified quickly. We reviewed our existing authorities and programs to see where this might be a good fit and landed on the framework of our chapter 34 Disaster Assistance Program. But we did add a couple of distinguishing features to it.
First, the Pass-Through Assistance Program for the COVID-19 National Emergency is nationwide in scope. And secondly, the provisioning of assistance under this program does not constitute a default in and of itself. That is a significant change from the way that our Disaster Program has previously operated. After we identified the objectives and the policy course, we felt that it was important to let the market know what we had in mind and what that would entail. We published a blog post on GinnieMae.gov, and two weeks after that announcement, we released an all participant memorandum, MBS guide changes in corresponding appendices to implement the program for our single-family MBS program. And then we followed that up in May actually, by extending the Pass-Through Assistance Program to the multifamily MBS program. That’s how we got from the idea to execution.
What were the expectations for the program when it began, and what are your expectations moving forward?
Just as we don’t have a volume target per se in the day-to-day administration of the Ginnie Mae program, we don’t have an uptake target on Pass-Through Assistance for COVID-19. But we clearly thought that the forbearance policies being implemented at the ensuring and guaranteeing agencies would cause some liquidity stress for some of our program participants. We thought it was better to be safe than sorry and have this last-resort financing option available in the marketplace.
Some issuers have come to us, others have tapped corporate reserves, others have secured financing from third parties, and others have really relied upon excess funds being generated by refinance transactions to cover delinquent principle and interest. But going forward, we’re going to continue to monitor delinquencies and forbearances closely and evaluate each application that comes in every month on its own merit. The short answer to it is there is no particular target for uptake, but we just wanted to make sure it was available to serv