Ginnie Mae provides more leeway for Libor-indexed reverse mortgages

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The transition away from Libor will be particularly tough for reverse mortgage lenders, given the relatively high percentage of loans in the market indexed to it.

To address that, Ginnie Mae has extended the time it’s giving issuers of mortgage-backed securities it insures to make the switch.

“After further consideration of the impact of the COVID-19 pandemic on a lender’s ability to close HECM transactions that were initiated prior to the publication of APM 20-12, Ginnie Mae is hereby extending the deadline for securitization of new Libor-based HECMs,” the government agency said in an all participant memorandum published Wednesday.

The new deadline after which Home Equity Conversion Mortgages indexed to Libor cannot be included in Ginnie-insured securitizations is March 1, 2021. The previous APM issued in September, had set a Jan. 1, 2021 deadline.

The new deadline effectively means that most Libor-based HECMs must be securitized into Ginnie mortgage-backed securities with an issue date of Feb. 1, 2021 or earlier.

Ginnie Mae will make exceptions for the participations that follow the initial participation associated with collateral in HMBS with an issue date of Feb. 1, 2021 or earlier.

These will “continue to be eligible for securitization without restriction until further notice,” according to Ginnie.

The combined effect of the Libor deadline and lower interest rates have increased HMBS volume this year relative to 2019.

November was one of the strongest months seen for HMBS issuance this year, second only to July when it received an unusual boost from the securitization of older loans. Issuance totaled $956 million last month, up from $732 million a year earlier and $879 million in October 2020.

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LIBOR Reverse mortgages Ginnie Mae MBS Capital markets