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Ginnie liquidity initiative discussion added to MSR webinar today

An official with Ginnie Mae recently announced a new initiative that seeks to address concerns about the liquidity of nonbank issuers in Ginnie’s single-family mortgage-backed securities (MBS) program.

Since Leslie Meaux Pordzik, acting senior vice president in the Office of Issuer and Portfolio Management at Ginnie Mae, made the announcement two weeks ago during the annual convention of the Mortgage Bankers Association, Ginnie formalized the policies within the initiative. Last week, Ginnie sent some nonbank issuers a letter with an outline of the proposed policies.

The letter was sent in advance of policy feedback interviews with issuers in the first quarter of 2019. The policies outlined encompass strategic planning for financial soundness, according to several nonbank issuers who received the letter, but several recipients expressed concern about the MSR portfolio stress testing required for the 75 largest issuers.

“A handful of MSR portfolio stress testing factors were listed at a high level,” according to Tom Cronin, managing director of The Collingwood Group, a Situs company. “The request was for identification of strategies to counter a downturn in originations, which could be associated with increases in interest rates; the plan if delinquencies increase and the level of advances increases; and how overall liquidity would be impacted by losses of warehouse and MSR financing lines. What was missing – and where there will be questions and feedback for Ginnie – were specific parameters and best practices for the stress testing.”

“There are many interconnected things in servicing that affect your financial statement, so when you’re modeling losses in general, you’re pulling on one string which starts to unwind several parts of the ball,” added Mark Garland, managing director of analytics and head of MSR valuation at MountainView Financial Solutions, a Situs company. “Besides accounting for the more obvious issues in your stress testing, like incidence and severity, there are many servicing cash flows that will be impacted, including cost to service, servicing revenue realization, cost of advance, loss exposure and the market-based effective servicing yield.”

With this initiative top of mind for Ginnie Mae issuers, Cronin is going to be a guest presenter in MountainView’s MSR Asset Monthly Snapshot webinar today. Garland and Cronin will discuss the key points issuers should focus on over the next two months in anticipation of their feedback meetings with Ginnie Mae. Registration for the webinar will be open until the 1 p.m. ET start.