Ginnie Servicers Face New Delinquency Regulations

Federal banking regulators have changed the reporting requirements for delinquent loans in Ginnie Mae mortgage-backed securities, despite opposition from Ginnie issuers.

In the June 30 Call Report that banks file with regulators, Ginnie seller/servicers will have to report delinquent loans as past due whether they have repurchased the loans or not.

Lenders have resisted this change, claiming the Call Report disclosure misrepresents the risks associated with these loans, which are guaranteed by the Federal Housing Administration and the Department of Veterans Affairs. They also are concerned that analysts and others will view these data negatively.

But the bank regulators view the seller/servicers' right to repurchase delinquent mortgages from Ginnie Mae pools as an "unconditional" option. And they want the reporting of these options to conform to Financial Accounting Statement No. 140.

Supplemental instructions for the June 30 Call Report say, "A seller-servicer must report all delinquent rebooked [Ginnie Mae] loans that have been repurchased or are eligible for repurchase as past due in Schedule RC-N in accordance with their contractual repayment terms."

The Federal Deposit Insurance Corp., Office of Comptroller of the Currency and the Federal Reserve Board signed off on the new Ginnie Mae reporting changes.

To resolve one of the "big complaints" by the banks, the regulators added a separate line item for Ginnie-repurchased loans. "We do read the comments," an OCC accountant said.

The banking regulators also decided that mortgages in Ginnie pools that go into foreclosure should be reported as "other real estate-owned" starting with the March 31, 2006 Call Report. Many banks currently report Ginnie REO as "other assets."

The banks complained that this classification is putting "form over substance" since the government guarantee protects them from losses due to declines in property values.

We are disappointed," said MBA's accounting director Alison Utermohlen, "although we are gratified that they created a separate line item for reporting delinquent FHA and VA loans."

The regulators are planning to have a separate line for Ginnie Mae REO.

The banking regulators are still waiting final approval of the June 30 Call Report changes from the Office of Management and Budget. "Should OMB not approve some or all of these changes, the agencies will notify the banks accordingly," the regulators said in a June 28 release.

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