July 23, 2018
The Government National Mortgage Association (aka, Ginnie Mae) was created in 1938 to support the financing tougher credit risks such as the first-time homebuyer, the cash-strapped buyer, manufactured homes and lower income credit buyers. These homebuyers usually have risk factors that will translate into bigger loan level pricing adjustments and will often require a higher note rate to make the math work. If higher note rates are not available, then it becomes tough to finance this level of borrower, compromising Ginnie Mae's mission.
Much of Ginnie Mae’s focus is on FHA and VA loans, both of which Orion does. (Check out our FUEL line-up!) In fact, some of Orion’s broker’s best clients or FHA and VA borrowers. Due to concerns about VA loan churning (the practice of convincing existing borrowers to refinance) Ginnie Mae has issued new criterion to all lenders and temporarily banned three of them from issuing VA loans into the Ginnie Mae multi-issuer mortgage-backed securities (MBS) pools.
Ginnie Mae has two concerns. The first is the fees incurred by borrowers for repeated refinances. Second, the early repayment of the VA loans, thus curbing the financial benefit to investors in MBS pools. It can take years for the borrowers to break even on the fees paid. Early repayment of the loans impacts the ability of investors to make their desired returns. The demand for certain coupon levels is reduced which in turn, affects loan pricing for borrowers.
We remind our brokers that Orion has a full slate of FHA and VA programs. We will keep it that way. As of June 1, 2018, to be eligible for Ginnie Mae MBS pools, all lenders will need to wait until after the borrower has made six consecutive monthly payments on the loan being refinanced. To demonstrate that Ginnie is serious, it announced it was booting several lenders from its Department of Veterans Affairs securities programs. NewDay USA, Freedom Mortgage, and SunWest Mortgage had been restricted from Ginnie’s primary mortgage bond program. Orion firmly believes in supporting our brokers and their FHA and VA borrowers, and helping them save money.