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How a New Law Affects Ginnie Mae’s VA Securities

The Protecting Affordable Mortgages for Veterans Act of 2019, which was recently signed into law, changes the eligibility criteria of certain VA loans in Ginnie Mae Securities.

According to an announcement by Ginnie Mae, it is implementing changes to pooling eligibility requirements for Department of Veteran's Affairs (VA) -insured or -guaranteed mortgages. The All Participants Memorandum (APM 19-05) issued by the government securities agency, revises the pooling eligibility requirements applicable to all VA-guaranteed refinance loans and establishes new pooling criteria for certain cash-out refinances with loan-to-value (LTV) ratios exceeding 90%.

Ginnie Mae said that effective with mortgage-backed securities (MBS) guaranteed on or after November 1, 2019, High LTV VA Cash-Out Refinance Loans would be ineligible for Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools. The only exception would be in cases when the loans are "Permanent Financing Construction Loans, as defined in Chapter 24 of the MBS Guide."

The new revisions to VA securities were part of advancing these objectives, Ginnie Mae said in its latest APM.

As part of these changes, Ginnie Mae said that high LTV VA cash-out refinances could be pooled into Ginnie Mae II Custom Pools without restriction, provided they satisfied the seasoning and number of payment requirements. As a result of these revisions, Ginnie Mae said that its MBS pooling eligibility was moving closer to that of Fannie Mae, Freddie Mac, and the Federal Housing Administration.

Ginnie Mae said that these changes continued to provide veterans who use their earned benefit access to the government-guaranteed MBS market and global investors with increased certainty in the performance of the Ginnie Mae security, "which ultimately lowers mortgage rates for all borrowers served by the program."

Ginnie Mae said that the Protecting Affordable Mortgages for Veterans Act of 2019, which was signed into law by President Trump in July, revises the loan seasoning requirements and Ginnie Mae statutory changes prescribed by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018.

While the agency had already published an APM to implement the seasoning requirements prescribed by the 2018 Act to ensure the strength and liquidity of the MBS Program, the agency has, since then, collected "industry feedback to explore additional MBS program requirements that may have a positive impact on the performance of Ginnie Mae securities, and thereby benefit the borrowers participating in the federal housing programs we support."

About Author: Radhika Ojha

Radhika Ojha is an independent writer and copy-editor, and a reporter for DS News. She is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her masters degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha, also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Houston, Texas.
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