Issuers of mortgage-backed securities guaranteed by the Government National Mortgage Association will soon face minimum activity requirements.
Ginnie Mae reported Thursday that it has seen an increase in the number of companies that are granted issuer approval but fail to generate any issuances.
The Washington-based firm noted that it utilizes significant resources in the review and analysis of issuer applications.
But the expense is justified as long as the issuer is active.
“Ginnie Mae expects that approved issuers will proceed to actively participate in the Ginnie Mae MBS program(s) for which they have been approved by issuing, acquiring issuer responsibility for, or subservicing Ginnie Mae MBS shortly after approval, and continue to do so for as long as they maintain an approved status in their respective program(s),” the statement said. “Long-term lack of participation calls into question whether issuers continue to possess the operational capability that was a basis for the original approval.”
In order to remedy the incurrence of expense for inactive issuers, the government-owned corporation is establishing minimum activity requirements.
Issuers who were approved after July 1, 2013, will need to demonstrate participation within 18 months of their approval date.
Those that don’t comply with the requirement can either withdraw from the program or request an extension of time to become active.
“Ginnie Mae will review the circumstances, and in its sole discretion will determine whether an inactive Issuer will be involuntarily withdrawn, or granted an extension for a reasonable amount of time in order to comply with the requirement based on the particular facts and circumstances,” the announcement said.
Companies that have withdrawn from the program can subsequently reapply through the normal approval process.
State housing finance agencies are exempt from the new requirement. Also exempt are participation agents for home-equity conversion mortgage MBS.
The new requirement becomes effective on Jan. 1, 2015.
