From the Top RM: Is there a minimum dollar amount that investors of HMBS require? BD: No, there isn’t. I’ve traded pools right at the minimum amount of $250,000, and they trade surprisingly well. I would say in general, anything over $5 million is ideal, but $10 to $20 million is probably a sweet spot. RM: Ginnie Mae authorized the $250,000 minimum pool size in 2023 as part of its ongoing efforts to minimize liquidity risk. Has that change had a positive impact? BD: Yes, and it’s been a huge help for issuers who don’t have alternative sources of financing for “tails.” RM: For our readers’ sake, explain what a “tail” is. BD: After a HECM is funded, we pool loans together and then securitize them as HMBS pools. After the initial securitization, there are various ways that the balance of the loans grows more than the security, such as borrower draws, interest accruals and monthly mortgage insurance premium (MIP) payments. One of the ways that servicers earn income is through subsequent securitizations of those balances, which we refer to as tails. RM: NRMLA and its Executive Committee spent a great deal of time with Ginnie Mae this past year working on new policies to help reduce the liquidity risk felt by HMBS issuers. While there’s still more to do, how have some of the changes impacted your business? BD: Ginnie Mae’s actions thus far have had a huge impact on our business. First, Ginnie Mae reduced the minimum pool size from $1 million to $250,000, which freed up a lot of liquidity for us. Second, the implementation of multiple participations per month has helped a lot, too. Once you securitize a participation in a loan, if the borrower draws later that month, under the prior rules you couldn’t securitize that draw. So, it involves a lot of analytics to balance the benefits from securitizing versus the risk of draws that month. The new guidelines that allow for multiple participations essentially free up even more liquidity and reduce the amount of risk we need to take when doing securitizations. Lastly, we’ve seen quicker turn times for assignable buyouts. Ginnie Mae requires issuers to purchase HECM loans out of pools when the loan balance, including principal plus any accrued interest and MIP, reaches 98 percent of its “maximum claim amount.” If the loans being bought out are current, they can be assigned to the U.S. Department of Housing and Urban Development, and the issuers are paid a claim. We’re essentially holding buyouts for a shorter period, which frees up additional funds. RM: What distinguishes TMAC from other wholesale lenders? BD: We are the largest family-owned and operated issuer, which comes with certain advantages. We’re lean, and this right-size cost structure allows us to pass the savings on to our customers through better rates and prices. It also allows us to pivot quickly if the environment changes and do the right thing for our customers. Given our size and focus on service, we’ve been able to create superior client opportunities and outcomes and better employee career opportunities. RM: What plans does TMAC have in 2024 to expand its footprint in the reverse mortgage marketplace? BD: We plan to continue closely monitoring the economic landscape and setting our sights where we see the most opportunity. This applies to both volume origination, channel diversification and strategic hires. For now, we’re going to continue to expand into wholesale as we continue to realize the benefits of our recent focus on it and pick up momentum in this segment. Darryl Hicks is NRMLA’s vice president of communications. From the Top continued from page 9 “We plan to continue closely monitoring the economic landscape and setting our sights where we see the most opportunity.” —Brett Dunn, chief investment officer/ chief operating officer, Traditional Mortgage Acceptance Corp. 10 REVERSE MORTGAGE / MARCH-APRIL 2024
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