The Federal Housing Finance Agency (FHFA) and Ginnie Mae have issued an announcement of their updated minimum financial eligibility requirements for seller/servicers and issuers.
Prompted by rapidly changing U.S. housing finance system, these new eligibility requirements reflect Ginnie Mae’s and FHFA’s shared goals to promote confidence in approved issuers and seller/servicers and improve the safety and soundness of the U.S. mortgage-backed securities (MBS) ecosystem through all economic cycles.
“The robust collaboration of Ginnie Mae President Alanna McCargo and FHFA Director Sandra L. Thompson is a testament to their leadership and shared commitment to sustainable access to credit for American families,” said U.S. Department of Housing & Urban Development (HUD) Secretary Marcia L. Fudge. “The action announced today will ensure that we continue to address the needs of underserved communities through easy, equitable and sustained access to mortgage credit.”
Since 2020, FHFA and Ginnie Mae have coordinated their analyses, engaged in stakeholder outreach, and held an April 2022 joint listening session to consider feedback on the impact the revised requirements will have on the mortgage industry. To reduce regulatory burden and provide greater consistency and predictability for seller/servicers and issuers, FHFA and Ginnie Mae worked closely to align their respective standards and implementation timelines to the greatest extent possible. Most of these new requirements are effective on September 30, 2023.
The 2015 Eligibility Requirements became effective December 31, 2015, and have remained in effect with minor modifications. The 2015 Eligibility Requirements established minimum levels of capital and liquidity to be maintained by seller/servicers to service single-family mortgage loans guaranteed or owned by the GSEs.
“The updated eligibility requirements represent an ongoing commitment to the safety and soundness of Fannie Mae and Freddie Mac by strengthening the capacity of seller/servicers to meet the financial responsibilities associated with doing business with the Enterprises,” said FHFA Director Thompson. “FHFA and Ginnie Mae’s effort to coordinate on financial eligibility requirements provides greater consistency for Enterprise seller/servicers and Ginnie Mae issuers.”
Ginnie Mae President McCargo added, “Ensuring that Ginnie Mae issuers can acquire financing during times of stress is critical to preserving access to credit for those borrowers who depend on Ginnie Mae and our insuring agency partners. These enhanced requirements, the product of our historic collaboration with FHFA, will promote the resilience of our issuers and better enable them to operate throughout economic cycles.”
The Conference of State Bank Supervisors (CSBS) stated, "As the primary supervisors of non-bank mortgage companies, state financial regulators strongly support greater coordination across all mortgage supervisors and are encouraged by this development. CSBS’s 2021 Model State Regulatory Prudential Standards for Nonbank Mortgage Servicers already significantly aligned its financial condition requirements with FHFA’s capital and liquidity requirements. Today’s announcement brings state and federal areas of supervision closer together. In the coming weeks, we will review our model prudential standards to identify further opportunities for alignment with FHFA and Ginnie Mae. As states move forward with implementing the model prudential standards, better information sharing between FHFA, Ginnie Mae and the states will be critical for determining company adherence to aligned standards."
Of note, the FHFA and Ginnie Mae have extended the implementation timeline to provide mortgage servicers sufficient runway to adjust to these new requirements.
“These requirements play a substantial role in the financial planning and risk management practices of institutions that originate and service GSE- and Ginnie-backed loans,” said Bob Broeksmit, CMB, President and CEO of the Mortgage Bankers Association (MBA). “MBA has long acknowledged the importance of ensuring stability and resiliency in the mortgage sector, while also noting the need for any such requirements to be tailored appropriately to the risks presented in the market.”