How Ginnie Mae will aid issuers affected by Hurricane Harvey
Ginnie Mae is preparing to give servicing assistance to issuers affected by Hurricane Harvey if more than 5% of their portfolio is in a federal disaster area.
"Any Ginnie Mae issuer in need of assistance should contact us as soon as possible so we can guide them through this difficult period," said Michael Bright, Ginnie Mae's executive vice president and chief operating officer, in a press release. Bright is acting as Ginnie's president while the role remains unfilled.
Ginnie mortgage-backed securities issuers that have this type of portfolio concentration can get help making pass-through payments to investors on loans with forbearance, delete affected loans from delinquency ratio calculations, and buy out affected loans from securitized pools, if approved.
Locations outside federal disaster areas may be eligible for assistance if the hurricane directly affects homeowners' employment opportunities and incomes.
Fannie Mae and Freddie Mac, as well as Ginnie Mae, expect lenders to extend forbearance to borrowers affected by Hurricane Harvey that will affect collateral in securitized pools.
Payments on affected loans could be reduced for six months and then extended for another half year if needed, and late fees and other penalties tend to be waived for a period of time in disaster areas.
The government-sponsored enterprises also have begun looking at how hurricane-related servicing relief will affect the cash-flows to investors from securitized mortgage pools.
Freddie, for example, recently issued a notice warning that securitized loans affected by the hurricane might be handled with differently.
Typically, Freddie repurchases loans that are 120 or more days delinquent from related securitizations, but if a loan is in forbearance related to disaster relief, it has more discretion.
The loan could still be removed from the securitized pool, or eventually bought out if delinquency persists after forbearance expires. However, forbearance on a delinquent loan affected by the hurricane could continue as long as 24 months before Freddie will repurchase it.