Ginnie Mae Implements Broad-Based Servicer Liquidity Facility
Late Friday, Ginnie Mae issued All Participants Memorandum 20-03 (APM 20-03), which expands its Issuer assistance programs to current circumstances stemming from the coronavirus pandemic.
The APM introduces a new version of its existing Pass-Through Assistance Program for use by issuers facing a temporary liquidity shortfall directly attributable to the COVID-19 National Emergency. The initial deadline for issuers seeking PTAP assistance for investor remittances due on April 20 was yesterday.
MBA Senior Vice President of Residential Policy and Member Engagement Pete Mills called implementation of PTAP a “very welcome development,” noting MBA led a broad coalition of industry and affordable housing advocates in pressing policymakers to provide sufficient liquidity for servicers to carry out the borrower forbearance mandated by Congress.
Ginnie Mae said the existing PTAP program had been tailored to natural disaster situations with more limited impact. The application of PTAP to the COVID-19 National Emergency allows Issuers to apply for assistance in meeting their contractual obligation to make timely and in full principal and interest payments due mortgage-backed security holders without being held in default under the Ginnie Mae Guaranty Agreement.
“This assistance is intended to minimize disruptions in the mortgage servicing and MBS capital markets as borrower forbearance and loss mitigation programs are implemented to provide relief to homeowners affected by the COVID-19 National Emergency,” Ginnie Mae said.
Funds advanced by Ginnie Mae will bear a fixed rate of interest. The rate that will apply to a given month’s pass-through assistance to all Issuers will be posted on Ginnie Mae’s website on the second business day of each month.
“This is an extraordinary and last resort option for Issuers in these unprecedented times, that will enable them to continue to serve homeowners and renters in America who rely on the government mortgage programs financed by Ginnie Mae,” said Ginnie Mae Principal Executive Vice President Seth Appleton.
Mills noted as was expected, Ginnie Mae will make PTAP broadly available to issuers and, in a critically important development aligned with MBA advocacy, Ginnie Mae will not hold issuers that participate in PTAP to be in default of its program guidelines. Participation in PTAP will be subject to a Master Supervisory Agreement that will govern the terms of assistance.
“Development of a facility to assist issuers with advances of principal and interest is crucial given the potential for widespread borrower forbearance in the coming days and weeks,” Mills said. He added MBA will continue to work closely with Ginnie Mae to ensure the program is a success and will also continue to fight for a complementary liquidity facility to be created by the Federal Reserve to address the portions of the market not covered by PTAP.