Ted Tozer, the president of Ginnie Mae from 2010 to 2017 and now a nonresident fellow at the Urban Institute, authored a white paper that offers a way to enhance the liquidity of issuers of FHA-insured forward mortgages and reverse mortgages during economic disruptions so that future bankruptcies can be avoided.
“To ensure IMBs (Independent Mortgage Banks)—which are critical actors in the lending market—don’t collapse during the next major recession, Ginnie Mae can consider guaranteeing short-term IMB funding,” said Tozer.
Tozer notes that Reverse Mortgage Funding (RMF) was forced into bankruptcy because of a lack of liquidity brought on by a Ginnie Mae rule that requires HECMs to be purchased out of HMBS pools once the balance on the loans reach 98 percent of the maximum claim amount.
He adds, “Guaranteeing short-term IMB obligations would ensure adequate funding during times of market stress and would encourage banks to continue to lend to their nonbank counterparts. To relieve some of the pressure on IMBs, Ginnie Mae could do this by using federally backed mortgages as collateral. Read the full article.