MBA Statement on HUD OIG Audit of Ginnie Mae’s Oversight of Nonbanks

Mortgage Bankers Association President and CEO David Stevens, CMB, issued the following statement regarding the HUD Office of Inspector General Audit of Ginnie Mae’s Oversight of Nonbanks:

“Earlier this week, HUD’s Office of Inspector General released the findings of its multi-year review of Ginnie Mae’s oversight of nonbank issuers. Unfortunately, while the report correctly notes the importance of Ginnie Mae adapting its oversight to changes in its issuer base, both the report and some subsequent media coverage have mischaracterized the role of, and the risks posed by, nonbank issuers.

“Independent mortgage bankers have served as Ginnie Mae issuers for decades, providing critical funding for borrowers served by the FHA, VA and other vital government mortgage programs. And when many banks scaled back their presence in the mortgage market following the last recession, IMBs stepped in to ensure that mortgage credit continued to flow to creditworthy borrowers. Further, IMBs are currently subject to stronger state and federal regulation than ever before, including robust examinations by both the states and the CFPB and better information sharing between regulators at all levels–facts conspicuously absent from both the OIG report and some media coverage.

“Improvements to Ginnie Mae’s issuer oversight should focus on the growth in the number and diversity of issuers and the need for adequate resources and tools for this function. To this end, MBA continues to call for Ginnie Mae to have access to sufficient resources to adequately monitor its counterparties–both bank and nonbank.

“A robust Ginnie Mae issuer base has many benefits, including more choice and lower costs for consumers, as well as reduced concentration risks for Ginnie Mae. Rather than focusing on different business models and market share numbers, the focus should be on ensuring that Ginnie Mae is given the resources needed to oversee the market in a responsible manner.”

The HUD OIG report, issued last week (, was highly critical of Ginnie Mae’s oversight of nonbanks due to the growth of nonbank issuers in the mortgage servicing industry.

“We found that Ginnie Mae did not adequately respond to changes in its issuer base,” the report said. “Specifically, it did not implement policies and procedures in a timely manner for its account executives to follow in managing issuers, did not develop a written default strategy, and did not assess and address the risks posed by nonbanks in a timely manner.”

As a result, the report said, “Ginnie Mae may not identify problems with issuers in time to prevent default. Additionally, it may not be able to properly service loans absorbed in a default and may require additional funds from the United States Treasury to pay investors in the event of a large issuer default.”

The report recommended Ginnie Mae develop and implement controls to:

–ensure that policies and procedures for account executives are continually reviewed and updated to reflect changes in Ginnie Mae’s operations;

–determine the total impact of a large or multiple-issuer default, the maximize-size default Ginnie Mae can adequately execute, and individual issuers’ ability to adapt to changing market conditions;

–continually assess skills required to meet organizational goals; and

–ensure that employee skill levels are developed to meet changing organizational needs.