Page 37 - February 2018 Disruption Report Flip Book

EQUIFAX’S “WATERSHED MOMENT” JANUARY 2018
Ginnie Mae calls out MBS outliers in anti- churn drive
In a review of issuer performance, Ginnie Mae identified nine lenders with prepayment speeds that substantially deviate from the mean over an extended period. The agency asked the lenders to deliver a corrective plan of action to identify strategies to bring their prepayment speeds in line with peers. If the lenders are unable to demonstrate a path to improved performance, Ginnie Mae said it may impose restrictions on access to multi-issuer pools and limit their access to custom pools.
“We have an obligation to take necessary measures to prevent the lending practices of a few
from impairing the performance of our multi-issuer securities, and thus raising the cost of homeownership for millions of Americans,” said Ginnie Mae COO and EVP Michael Bright. “By addressing the anomalous performance of a few lenders, Ginnie Mae is acting to protect veterans, the broader Ginnie Mae program, the American taxpayer, and the consumers we serve. We expect issuers receiving these notices to respond quickly, produce a corrective action plan, and come into compliance with our program.”
As a result of the Lender Abuse Task Force launched by the Department of Veteran Affairs, Ginnie Mae outlined acceptable risk parameters for agency mortgages and implemented an ongoing issuer evaluation, which resulted steps to prevent churning of VA loans.
Several issuers that Ginnie Mae targeted for allegedly churning VA loans have denied engaging in the practice. Flagstar Bank and NewDay Financial disclosed that they have policies and procedures in place to prevent churning, but offered no explanation regarding why they were on Ginnie’s list
of lenders that are “materially worse than its peers as to be an outlier.” (MPA Magazine, Francis Monfort, 02/12/18; IMF News George Brooks, 02/27/18)
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