The National Reverse Mortgage Lenders Association (NRMLA) and the Mortgage Bankers Association (MBA) have jointly submitted a letter to Ginnie Mae acting president Sam Valverde, sharing their insights on the proposed supplemental Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) program.
This program, known as “HMBS 2.0” in the industry, was first announced to be in development at the start of the year. A term sheet outlining its proposed provisions was released in late June, with a 30-day comment period following. An official from Ginnie Mae had previously expressed anticipation for industry feedback on the proposal to HousingWire‘s Reverse Mortgage Daily (RMD).
The joint letter commended Ginnie Mae for developing the program in response to the liquidity challenges following the 2022 failure of Reverse Mortgage Funding (RMF), a major HMBS issuer. The trade groups expressed hope that the feedback provided could enhance and clarify key terms and provisions of HMBS 2.0.
Among the recommendations in the letter is the suggestion for a 100% pooling maximum participation rate with a 5% risk retention requirement, aligning the new program with existing HMBS provisions and Dodd-Frank Act guidelines for nonagency securitizations. The letter also proposed updating the definition of “participation” in Ginnie Mae mortgage-backed securities (MBS) to enhance transparency and alignment with U.S. Department of Housing and Urban Development (HUD)’s HECM model loan agreement.
The letter also addressed pool certification requirements to cater to legal and operational considerations unique to HMBS 2.0, which will not be assignable to HUD. The program aims to alleviate liquidity constraints for HMBS issuers by facilitating the pooling of active and non-active buyouts into new custom, single-issuer pools.
According to MBA, HMBS 2.0 will permit the pooling of HECMs within a specific range of outstanding unpaid principal balance, offering potential benefits for HMBS issuers. The trade groups encouraged continued feedback from members to shape the HMBS 2.0 program in a way that supports issuer liquidity while safeguarding taxpayers’ interests.
NRMLA President Steve Irwin expressed optimism about the proposed program, highlighting Ginnie Mae’s dedication to the HECM program despite resource constraints. Ginnie Mae’s assumption of the former RMF servicing portfolio has strained its resources, necessitating additional staffing and funding to manage the HMBS program effectively.
Despite recent approval of additional funds by a Senate committee, the extent of support for Ginnie Mae’s resource needs in Congress remains uncertain.