An Issuer termination occurs when an Issuer violates the requirements of the Guaranty Agreements between the Issuer and Ginnie Mae, the form of which is set out in the Ginnie Mae Guide 5500.3 https://www.ginniemae.gov/Issuers/program_guidelines/Pages/mbs_guide.aspx. Upon the determination to terminate the Issuer for the program, Ginnie Mae may remove its Issuer active status and require its Contractor to seize its active pooled portfolio and the corresponding loan and transaction-level data and documentation. The Contractor shall transfer the pools and underlying loans to the Contractors servicing system, service them in accordance with the respective agency guidance, submit operational and financial reporting to Ginnie Mae and/or sell/transfer them under the terms set forth by Ginnie Mae. A termination may also occur when an Issuer asks to have its Issuer status removed or if Ginnie Mae enters into a third-party purchase and sales agreement wherein Ginnie Mae must repurchase/transfer loans after the fact but in conjunction with an Issuer termination. This would be considered a termination and non-seizure where the termination occurred, but no loans were immediately seized.
There may be occasions, at Ginnie Mae’s discretion, the Contractor will be required to perform special services on a select group of loans. The loans may be delinquent and/or in various stages of default or have specific and outside of the normal servicing agency reporting requirements. The Contractor may need to provide enhanced services for collection and loss mitigation functions. Additionally, there may be occasions where, at Ginnie Mae’s discretion, we will terminate and not seize a portfolio but will require the Contractor to provide oversight and consultative services to effectuate an orderly transfer. Ginnie Mae holds a terminated and seized HECM portfolio totaling approximately $18 billion. To date, there has been one (1) termination and seizure of $20 billion. The future level of termination and seizure activity is uncertain and dependent upon various Issuer, program, and economic factors. In difficult economic times, Ginnie Mae must be prepared to handle a large volume of terminations and seizures to ensure it can fulfill its guaranteed obligations. There are periods where the Contractor will be called upon to effectuate the seizure of multiple Issuers in a single year and there are occasions where a seizure may not happen for many months. Ginnie Mae plays a vital role by guaranteeing pools of loans that are federally insured or guaranteed by the Federal Housing Administration (FHA) and/or the U.S. Department of Agriculture (USDA) Rural Development Program (RD). Through this program, holders of Mortgage-Backed Securities (MBS) receive a monthly “pass-through” of Principal and Interest (P&I) payments made by borrowers on the mortgages backing the securities, minus amounts to cover servicing fees and Ginnie Mae guarantee fees. Ginnie Mae guarantees the registered holders of these securities the timely payments of scheduled monthly P&I payments, loan prepayments, and early recoveries of principal on the underlying mortgages. If borrowers fail to make timely payments, Issuers are required to use their own resources to ensure the payments are made to the registered holders. Through its MBS program, Ginnie Mae creates a pathway for channeling global capital into the nation’s housing market. The full faith and credit guarantee provided by Ginnie Mae makes these securities widely accepted in capital markets, ensuring that funds are available to finance the mortgage market. The funds raised from the sale of these securities are then used by lenders to fund new mortgage loans. This process increases the overall availability of credit for loans and helps ensure that loans are provided at a reasonable interest rate. By guaranteeing MBS, Ginnie Mae supports its mission of fostering affordable housing and promoting stable communities. A key element of this mission is facilitating the construction and renovations, which include apartment buildings, hospitals, nursing homes, assisted-living facilities, and other essential housing options. By backing MBS that are sold to investors in the global capital markets, Ginnie Mae enables lenders to offer lower mortgage interest rates to borrowers, contributing to the growth of the affordable housing sector.
