Ginnie Mae on Friday announced that it has extended the mandatory implementation date of its controversial risk-based capital requirement (RBC) for nonbanks to Dec. 31, 2024.
The rule — which reduced the minimum risk-based capital ratio from 10% to 6%, but put a 250% risk weight on the MSR asset and the dollar-for-dollar deduction from capital for excess MSRs — was set to go into effect at the end of 2023.
In a statement, Ginnie Mae acknowledged some of the concerns mortgage trade groups and lenders had about complying with the new rules.
“The state of the U.S. housing market is evolving rapidly, and housing affordability has eroded nationwide, with first-time homebuyers and lower income households that Ginnie Mae exists to serve feeling the effects most acutely,” Ginnie Mae President Alanna McCargo said in a statement Friday.
“Our Issuers and the mortgage servicing industry are integral to the government mortgage system, and they are also adapting and adjusting to market conditions. As always, we are focused on working with our counterparties to manage risks and ensure continuity in serving the most underserved households through all economic cycles.”
Industry trade groups cheered the decision to delay the rule’s implementation.
If local lenders are able to leverage strategic partnerships to bring new loan offerings to market, they’ll be ideally positioned to serve a wider range of borrower needs and create lasting change in American homeownership.
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“Given current economic and mortgage market conditions, the extra time allows for continued dialogue and a much-needed comprehensive analysis to fully assess its impact,” Mortgage Bankers Association President and CEO Bob Broeksmit said in a statement.
He noted that the “punitive treatment” of MSRs could result in reduced liquidity of MSRs and limit lenders’ ability to serve borrowers in the Ginnie Mae servicing space.
The Community Home Lenders Association, a trade group whose members are smaller independent mortgage banks, asked Ginnie to “show flexibility” in these requirements as it works with issuers “in order to avoid a potential adverse market impact which might result from issuers selling Ginnie Mae MSRs to meet the new requirements.”
In an FAQ published in late September, Ginnie Mae said that if the new capital rule were in effect today, “95% of our Issuers (by count) would be compliant. Of those Issuers already compliant with RBCR, many have ample equity capital to support the acquisition of MSRs that may come on the market.”
As of September, the 30-day delinquency rate for FHA loans stood at 3.77%, up from 3.02% as of the beginning of the year, according to data from Recursion. The overall FHA delinquency rate — for loans 30-days late or more, excluding foreclosures — stood at 8.85% as of the second quarter of this year, compared with 4.22% for VA loans and 2.64% for conventional loans, according to the MBA.
As of Sept. 30, banks controlled 15.9% of the Ginnie MSR market, while nonbanks held an 84.1% market share, according to Recursion.