To help alleviate the ongoing liquidity pressures felt by HMBS issuers, Ginnie Mae last week updated its pooling requirements to allow for multiple participations related to a particular HECM in any one issuance month. Details were provided in All Participant Memorandum 23-11.
When a reverse mortgage borrower makes a draw request, those funds, plus mortgage insurance and interest, are pooled into an HMBS security at the beginning of the month.
If that same borrower made additional draw requests the same month, the issuer would have to borrow those funds from a warehouse line of credit, private capital, or other financing vehicle and carry that debt on its balance sheet until the following month.
Under the new rules, which take effect on October 1, an issuer won’t have to wait until the beginning of the next month but can now pool those additional participations in an HMBS right away.
“For some issuers, the impact will be immediate and significant,” says NRMLA President Steve Irwin. “For issuers with older books of business, the impact will be more incremental. This is a huge change that we had requested from Ginnie Mae and we are very appreciative of the steps taken with the publication of APM 23-11.”