The reverse mortgage product category assumed a much greater level of importance at government-owned company Ginnie Mae in 2023.
Following the bankruptcy of Reverse Mortgage Funding (RMF) in late 2022, Ginnie Mae took control of the RMF servicing portfolio, later requesting more resources to manage it adequately.
In this second part of RMD’s exclusive interview with Ginnie Mae President Alanna McCargo conducted at the National Reverse Mortgage Lenders Association (NRMLA) Annual Meeting and Expo in Nashville, we ask about the management of the RMF portfolio, what input from originators means for Ginnie Mae’s operations in the space and how her reverse mortgage perspectives have evolved.
Chris Clow/RMD: In terms of the management of the RMF portfolio, I know that that was probably shocking to take on in such a short period of time. How is that going?
Alanna McCargo: I would say is it’s gone remarkably well, but it has not been without issues here and there. [The fact] that we took on such a large portfolio, [and that] the transition for consumers and borrowers was pretty seamless [reflects that]. We have a master subservicer that we had a contract that’s in place for just this event, because this is a possibility, any given day with any counterparty, that they’re not able to make their payments.
That’s when our guarantee goes into place. I think it worked incredibly well. There’s a lot of new things that we’ve had to take on that were not part of what we did even a year ago, on an everyday basis. But ultimately, each borrower was made whole. And the only thing I’d say that I think is important is we have the capacity or authority to be an issuer. But we don’t have the operational team built out yet to be able to actually do that.
[The fact] that we’re holding this portfolio has a significant impact on the industry and it has impact on taxpayers, and we’re actually not able to issue any mortgage-backed securities at the moment. So that’s something that [takes time:] just building the muscle and capability that we need as an organization to do those kinds of things since we’re managing large portfolios such as this. [That will] be just really, heavily in focus for us. It’s part of our resource planning and hiring and everything we’re planning on doing in the near future, once we get a budget.
Clow: Reverse mortgage professionals aren’t shy, but there’s a large abundance of loan officers here. There’s not a lot of crossover between a reverse mortgage loan officer and the HMBS program outside of tangential details, but is it helpful to hear from them?
McCargo: Yeah, it’s incredibly helpful. Obviously, we work very closely with FHA. [Home Equity Conversion Mortgage (HECM)] is an FHA program, and we’re here to provide secondary market support and liquidity for it. It’s a beautiful cycle when it works well. It’s always very important. Investors demand product, and it’s based on volume.
So this is a very small program in the grand scheme of everything that we do, but it’s a critically important program. It’s a socially impactful program. So, we look at this as something that is really core to our mission, and we want to be able to continue to support it. We want to make sure it’s viable and sustainable for the long term, and understanding the challenges on the origination side so that more of this can be flowing to seniors who need to tap equity safely is important to the securitization side of the house, and the viability of our program.
So it all works together. It’s very, very helpful to hear [from originators]. I would say that we are better for understanding what’s happening on the front end of the market because it enables us to know what we need to do to support the back end of the market, or the secondary market better. So, it’s incredibly helpful.
Clow: How have your own perspectives on the HECM program changed throughout your career? You’ve been involved in the housing sector in a lot of different capacities. In terms of becoming aware of reverse mortgages and how your own perspective has evolved, what’s that journey been like?
McCargo: It’s been interesting. I’ve been aware of reverse mortgages and have worked around them for a long time. We spent a lot of time, when I was at the Urban Institute, convening and doing conferences and working on research to really talk about the program and the changes it needed for it to be a long-term success.
We really focused on the fact that the population is aging rapidly, and the need to tap equity safely is only going to increase over time. And so having a viable product which I hope one day has more participants involved in it — including more people originating it and more issuers — I think that’s, what a long-term, healthy product looks like. I have seen it come full circle.
Market conditions have really created a tremendous amount of stress on this space, and a lot of aging portfolios are seeing buyouts now that could become reality. That adds stress to balance sheets. All of those are things that we knew would come, and now we’re living in what we knew would come. It’s amazing to be in this seat, experiencing it in this time. And, frankly, having been working for an administration that is focused on having an impact, taking the action we need to and helping to get the industry through this and over the hump.
I feel like I’ve seen it come full circle, even before the changes to the program happened around 2015 and 2016 on the FHA side, because there were a lot of issues with the program that were addressed. In that period, there were still a lot of things, especially as we began doing securitizations, that we knew would need to be addressed. And so now, here we are.
Look for the final part of this exclusive interview on RMD soon. Read part one of the interview here.
