Ginnie Mae provides expanded loan buyout authority for disasters

Ginnie Mae on Monday gave its securitization issuers expanded authority to buy out loans from securitized pools affected by Hurricane Ian and Hurricane Fiona even if the mortgages involved don’t meet the normal rules for doing so.

The expanded buyout authority for loans affected by these disasters may help pave the way for borrower relief measures like forbearance, waivers of late fees, foreclosure bans and  modifications.

“When disasters hit, we want to be sure there is clarity for issuers that may need to exercise buyouts that enable them to more quickly render assistance,” Ginnie Mae President Alanna McCargo said in a press release.

Issuers must obtain written permission from Ginnie for the expanded buyouts and must also comply with the rules of other agencies that insure or guarantee mortgages at the loan level in addition to those of the government bond insurer. The expanded authority is temporary and expires March 31, 2023. Mortgages can only be re-pooled after successful modification in line with Ginnie’s and other relevant government agencies’ rules.

Department of Housing and Urban Development rules give Ginnie discretion to apply expanded buyout authority when a presidentially declared disaster occurs to support issuers providing relief to affected borrowers.

Loans must either be within the bounds of those areas, or experiencing hardship related to the related disaster as defined by agencies that insure or guarantee the mortgages at the loan level.

Hurricane Ian currently looks like it will go down as the largest in Florida’s history to date, according to catastrophe modeling firm Karen Clark & Co. Hurricane Fiona hit the U.S. territory of Puerto Rico particularly hard.

Around 7.7% of single-family properties underlying Ginnie Mae securities were located in Florida during the fiscal year ending Sept. 30, 2021. That concentration was second only to the Lone Star State’s, where 9.9% of total loans in Ginnie-backed securitizations were located. Ginnie’s FY 2022 annual report had not yet been released at the time of this writing.

The private securitized market’s exposure to Florida has been somewhat similar to Ginnie’s, with Kroll Bond Rating Agency recently estimating the average exposure for residential mortgage-backed securities it rates is 7.1%. KBRS also noted that 21 of these RMBS transactions have a Florida loan concentration that exceeds 20%.

The majority of Hurricane Ian’s damage is primarily concentrated within six counties within Florida. The average RMBS exposure to those areas is 1.7%, with top 10 transaction exposures being in the 4.7% to 8.4% range, Kroll found.