Ginnie Mae on Thursday announced a set of revised capital requirements that appear to be aimed at reducing red tape for federally insured credit unions and housing finance agencies.
The all-participants memorandum will bring Ginnie’s standards in line with other regulatory requirements credit unions must already meet, and exempts housing finance agencies due to their state-backed status, according to a press release issued by the federal mortgage-bond insurer. The memorandum, which becomes effective on Dec. 31, also largely confirms broader, existing standards for counterparties with one additional clarification: that Ginnie Mae loans eligible for repurchase are excluded from requirements related to calculating total assets used to determine leverage ratios. Ginnie Mae’s counterparties must currently meet a minimum leverage ratio of 6%.
“These changes to our institution-wide capital requirements accomplish two things – they harmonize our program requirements with standards enforced by other federal entities, and they better reflect the unique financial status of state housing agencies,” Ginnie Mae President Alanna McCargo said in the release. “This is important because credit unions and state housing finance agencies play critical roles in supporting community-based lending, particularly in underserved areas.”
The move is in line with McCargo’s previously stated interest in striking a balance between the need to manage counterparty risk and giving community lenders enough support to enable broader consumer access to credit. Ginnie Mae’s role is to ensure payments from securitized mortgages that other federal entities back at the loan level reach bond investors. It’s increasingly dependent on nonbank counterparties to distribute those cash-flows.
“To me, it seems like a tweak. The fact that HFAs are entities with access to government sources of funding, that’s important to consider when thinking about them from a capital perspective,” said David Battany, executive vice president of capital markets at Guild Mortgage. “Clarifying credit unions are regulated entities like banks also seems like it makes sense.”
But Battany and other experts at mortgage companies and trade groups contacted on Friday generally indicated their take on the APM was preliminary, pending further study of its details. Some hoped it meant Ginnie had backed off a controversial proposal that would tighten nonbank capital requirements, but most thought that was unlikely.
“Previously, they were talking about establishing a new risk-based capital requirement for [independent mortgage banks.] That was a huge problem for us, and I’m trying to understand whether this is saying they’re not going to do that,” said Scott Olson, executive director of the Community Home Lenders Association.
The changes announced Thursday do not affect existing capital requirements for non-depositories or the earlier proposal, which McCargo said she would be moving ahead with at a listening session in April, according to emails the Department of Housing and Urban Development’s press office sent in response to inquiries from this publication.