The late 2022 bankruptcy of leading reverse mortgage industry lender Reverse Mortgage Funding (RMF) is continuing to have an impact on the wider industry. A long-lasting mechanical impact of the event is focused on the market of Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) and its continuing impacts on the Government National Mortgage Association (Ginnie Mae).
RMF, which was known as the HMBS market’s “Issuer 42” by Ginnie Mae, continues to account for one-third of all outstanding HMBS, according to company data and private sources compiled by New View Advisors.
Ginnie Mae assumed control of RMF’s HMBS portfolio in December. At the time the portfolio was assumed, Ginnie Mae President Alanna McCargo assured borrowers that their payments would not be impacted by the transition.
In a recent analysis, New View Advisors assessed the size of the RMF portfolio relative to the total HMBS market.
“In Ginnie Mae’s recent data release, ‘Ginnie Mae – Reverse Mortgage Funding 42’ is now shown as the issuer of record for 4,044 former RMF pools,” New View observed in a recent commentary. “About $340 million of Issuer 42’s portfolio paid off in July. ‘Issuer 42’ HMBS accounts for just under $19.3 billion, or about 33% of all outstanding HMBS.”
While the former RMF portfolio accounts for one-third of all outstanding HMBS, the total outstanding share of the market has slightly declined over the course of the year. Data from January indicated that “Issuer 42” accounted for 35% of all outstanding HMBS, according to a previous analysis by New View.
The size and complexity of the portfolio has been an issue for Ginnie Mae. Assuming the RMF portfolio, the GSE later said, necessitated additional staffing and operations resources in order to more effectively manage the portfolio. Earlier this year, Ginnie Mae requested $61 million for fiscal year 2024 in the budget request submitted to Congress by the White House — which is $20.6 million higher than the 2023 enacted level.
Ginnie Mae detailed that part of the reason it is asking for increased funding is related to its managing of the RMF portfolio.
“We continue to spot new issues as we take the RMF portfolio in-house,” Ginnie’s budget request document said in March. “It has become clear that the HECM program requires enhanced governance across how Ginnie Mae makes decisions and across how we assess reverse Issuers and the risks they bring. In other words, because the HMBS program presents a heightened set of operational risks for Ginnie Mae, we require additional staff to work through these issues.”
Issues related to staffing and budget remain unresolved, according to recent comments made by McCargo at an event hosted by the Bipartisan Policy Center.
“We’ve been working really hard to expand the budget, resources and staff at Ginnie Mae, we have been woefully under-resourced,” McCargo said at the event earlier this week. “We have not grown very much if you look at […] the size of the portfolio that is now under our control. Not to mention [that] along the way, sometimes institutions fail and our guarantee goes into effect.”
This means that Ginnie Mae itself also has a portfolio, McCargo explained, which includes reverse mortgages.
“We have a balance sheet and assets that we’re managing, whether it’s reverse mortgages — which we have a big one of those right now — or even forward mortgages from prior defaults,” she said. “If there are defaults out there of our issuers, that’s when we step in and we have to take on that operation. We become the issuer/servicer of record. And so, there’s a lot of capacity we need to build so that we can do that very well, because our doing that well matters to taxpayers.”
