Ginnie May Excuse H4H Lenders for High Delinquencies

The Government National Mortgage Association will consider the effect of the Hope for Homeowners program before taking action against security issuers whose pools have high delinquencies. The agency requires issuers to maintain delinquency rates on outstanding pools below certain thresholds. Ginnie can take a variety of actions against a lender that fails to do so, such as forbidding it to issue new mortgage-backed securities or yanking its license to do business with the agency. In a memo to lenders dated Friday, Thomas R. Weakland, the agency's acting executive vice president, wrote that Hope for Homeowners loans "may experience higher delinquency levels than other FHA loans." The higher delinquency rates may become starkly apparent, because, as Mr. Weakland pointed out, Hope for Homeowners loans can only be pooled into one type of Ginnie security. Hence, "if an issuer's delinquency levels exceed Ginnie Mae's threshold, Ginnie Mae will consider the impact of H4H loans when determining the nature of any action it may take." Hope for Homeowners is a temporary program created last year under which borrowers who are at risk of being foreclosed on can refinance into a new, more affordable loan insured by the Federal Housing Administration. Ginnie also said Friday that Hope for Homeowners loans must have a term of 30 or 40 years, not one in between, to be included in its securities. The agency will create separate pools for the 40-year loans, which may not be commingled with the 30-year ones, Mr. Weakland wrote. Originally the maximum term for the new loan was 30 years, but this month the FHA extended it to 40 years, and said it would let lenders set the term at "some intermediate number of years."