Ginnie Mae will be allowing lenders to securitize single loans beginning in July, according to a report from the Washington Post.
The report said this move will help smaller lenders be more competitive when conducting business with Ginnie and with the Federal Housing Administration (FHA).
To level the playing field, the agency intends to begin allowing lenders to securitize single loans and will issue loans on a daily instead of a weekly basis, the Washington Post reported Department of Housing and Urban Development (HUD) Secretary Shaun Donovan as saying in prepared remarks at the Mortgage Bankers Association's annual National Policy Conference in Washington.
Meanwhile, FHA Commissioner David Stevens reportedly said in an interview that the single loans will be mixed into a pool of loans from different lenders. The policy changes will alllow smaller institutions increased flexibility as well as a competitive role in the lending process, Stevens said in an interview with the Washington Post.
Ginnie Mae lenders have to have a net worth of at least $1 million. The FHA will soon be making similar demands on the lenders it works with, according to the report.
According to the Washington Post report, it has always been that each lender must have a certain number of loans to receive the Ginnie Mae guarantee. Because of this, Ginnie-backed securities are dominated by the largest lenders such as Wells Fargo and Bank of America, the Washington Post said.
It has been more efficient for the smaller lenders to sell loans to the larger lenders to be included in a security instead of holding the loans on their own balance sheets for an extended period and then fund them, which could strain their limited capital, the report said.
However, by selling their loans to bigger aggregators, the smaller lenders could often not service those mortgages nor get the best possible return when the loans were sold to investors, according to the Washington Post.
ASR sister publication National Mortgage News (NMN) reported that Donovan also announced that in early May, HUD will start releasing a regular scorecard on all of the Obama administration's housing recovery programs so that the complete effect can be judged in its totality rather than piecemeal.
NMN said that Donovan really offered only a few details on the upcoming Ginnie Mae single loan program, although he did vouch for the GSE's having the technology and ability to allow lenders to deliver single loans that would eventually be pooled with other loans into a Ginnie Mae securitization.
The NMN report said that community banks and rural lenders must either sell their production to aggregators or hold loans on their books at a significant cost and risk until they have enough volume to create a pool large enough to sell to Ginnie Mae.
Under the new program, these lenders could now deliver what technically amounts to single-loan pools on a daily basis that Ginnie Mae will then place into a multi-lender pool, the NMN reported explained.
The report quoted Robert Couch, who was the head of Ginnie during the Bush administration's last months, as saying: "It will be interesting to see how (the program) works. But it sounds pretty creative to me."