Ginnie Mae to use natural disaster program to help struggling mortgage servicers

Changes to be implemented within next two weeks

TRD NATIONAL /
Mar.March 31, 2020 11:51 AM
Ginnie Mae principal executive vice president Seth Appleton (Credit: Wikipedia Commons; MHS)

Ginnie Mae principal executive vice president Seth Appleton (Credit: Wikipedia Commons; MHS)

Nonbank mortgage lenders, who are bracing for a massive cash crunch as borrowers across the country seek loan forbearance because of the coronavirus crisis, are set to get some relief thanks to a government program reserved for natural disasters.

Ginnie Mae, an agency within the Department of Housing and Urban Development that guarantees more than $2 trillion worth of mortgage-backed securities, plans to implement a pass-through assistance program through which it will advance principal and interest payments to investors on behalf of servicers who are short on cash.

“We have heard from our issuer and servicing partners that borrower forbearance arrangements that are nationwide in scope could place an enormous strain on issuers,” Ginnie Mae senior official Seth Appleton wrote in a blog post Friday. “Please know that we are taking action to address these concerns and potential liquidity challenges faced by Ginnie Mae issuers.”

The necessary changes to the program will be implemented within two weeks, Appleton wrote. Under existing rules, the advancing of funds due to a natural disaster is considered an event of default — which will not be the case for coronavirus-related advances.

Loans guaranteed by Ginnie Mae tend to have a much higher risk profile than Fannie Mae or Freddie Mac loans, and are expected to require more forbearance as the U.S. faces a severe economic crisis. Fannie and Freddie have also announced relief measures for landlords struggling to make mortgage payments.

Mortgage industry leaders have praised Ginnie’s move, but former Ginnie head Ted Tozer called it a “band-aid,” noting that a funding facility is still needed from the Federal Reserve and Treasury to aid servicers of other types of government-backed mortgages. [WSJ] — Kevin Sun


Related Articles

arrow_forward_ios
Lenders issued the most mortgages in 14 years last quarter (Credit: iStock)

Nonbank lenders could give serious boost to cooling housing market

Nonbank lenders could give serious boost to cooling housing market
Opendoor CEO Eric Woo and images of its Opendoor Home Loans app (Credit: Resolute Ventures)

iBuyer startup Opendoor launching new home loan program

iBuyer startup Opendoor launching new home loan program
(Credit: iStock)

Despite housing market slowdown, mortgage lenders just had a great second quarter

Despite housing market slowdown, mortgage lenders just had a great second quarter
Donald Trump and Kathy Kraninger (Credit: Getty Images and iStock)

Trump proposal would make getting a mortgage harder for homeowners deep in debt

Trump proposal would make getting a mortgage harder for homeowners deep in debt
The trend could reverse as younger people start to enter the real estate market (Credit: iStock)

Almost 40% of homes in the US are
mortgage-free

Almost 40% of homes in the US are
mortgage-free
Wells Fargo, JPMorgan Chase and Citigroup each recorded a rise in second quarter profits in their consumer divisions (Credit: iStock)

Banks see uptick in mortgages, but remain wary ahead of potential Fed interest rate cut

Banks see uptick in mortgages, but remain wary ahead of potential Fed interest rate cut
FHFA director Mark Calabria (Credit: Federal Housing Finance Agency and Getty Images)

Trump official to pressure Congress to privatize Freddie and Fannie

Trump official to pressure Congress to privatize Freddie and Fannie
Mortgage rates are still falling (Credit: iStock)

Mortgage rates plummet to lowest levels in nearly 2 years

Mortgage rates plummet to lowest levels in nearly 2 years
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...