We identified gaps in Ginnie Mae’s guidance and process for troubled issuers. Ginnie Mae made progress in developing an issuer default governance framework, but has not (1) defined its authorities for marketing troubled portfolios; (2) formalized guidance for how to identify potential buyers before extinguishment; (3) established expectations for determining portfolio value, price before sale, and evaluation against other options or (4) included a step to evaluate prospective purchasers’ ability to absorb an extinguished portfolio. Additionally, we found Ginnie Mae had implemented our previous recommendation to develop and implement controls to determine the total impact of a large- or multiple-issuer default, the maximum-size default Ginnie Mae could adequately execute, and individual issuers’ ability to adapt to changing market conditions, but there was a gap related to the semiannual capacity reports submitted by master subservicers (MSS).
Recommendations
Government National Mortgage Association
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Status2023-KC-0003-001-AOpenClosedPriorityPriority
We believe these open recommendations, if implemented, will have the greatest impact on helping HUD achieve its mission to create strong, sustainable, inclusive communities and quality affordable homes for all.
Closed on February 01, 2024Update its policy and procedures to define its authority for marketing troubled issuer portfolios and the conditions that must exist to extinguish issuers using rapid relocation.
Corrective Action Taken
As of February 2024, HUD addressed this recommendation in a Management Decision by providing the updated extinguishment SOP, the Rapid Relocation Process Flow, and the Rapid Relocation Extinguishment Process Steps, updated to include the conditions that must be present to execute an extinguishment using rapid relocation. We believe that these guidance enhancements will help Ginnie Mae to reduce exposure to risk when facilitating a sale and transfer of a troubled issuer’s portfolio and ensure that it sells portfolios with limited loss to the Government and with minimal disruption to the mortgage market.
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Status2023-KC-0003-001-BOpenClosedPriorityPriority
We believe these open recommendations, if implemented, will have the greatest impact on helping HUD achieve its mission to create strong, sustainable, inclusive communities and quality affordable homes for all.
Closed on May 29, 2024Update its policy and procedures to define what type of information Ginnie Mae may disclose and how it will handle protected information before extinguishment.
Corrective Action Taken
Ginnie Mae provided the updated SOP to clarify data and information handling through all phases of the termination/extinguishment process. Specifically, the updated procedures state that Ginnie Mae does not disclose Issuer or portfolio information within the Rapid Relo process. Ginnie Mae provided clarity in this enhancement that will reduce exposure to risk when facilitating a sale and transfer of a troubled issuer’s portfolio and ensure that it sells portfolios with limited loss to the Government and with minimal disruption to the mortgage market.
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Status2023-KC-0003-001-COpenClosedPriorityPriority
We believe these open recommendations, if implemented, will have the greatest impact on helping HUD achieve its mission to create strong, sustainable, inclusive communities and quality affordable homes for all.
Closed on May 29, 2024Update its Policies and procedures to define how Ginnie Mae will determine the portfolio value and price before Sale.
Corrective Action Taken
Ginnie Mae updated its Rapid Relocation Extinguishment SOP to specify the valuation model for rapid relocations will use the same valuation models as other extinguishment options, including examples of portfolio valuation. We believe this guidance enhancement will help Ginnie Mae to reduce exposure to risk when facilitating a sale and transfer of a troubled issuer’s portfolio and ensure that it sells portfolios with limited loss to the Government and with minimal disruption to the mortgage market.
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Status2023-KC-0003-001-DOpenClosedPriorityPriority
We believe these open recommendations, if implemented, will have the greatest impact on helping HUD achieve its mission to create strong, sustainable, inclusive communities and quality affordable homes for all.
Closed on May 29, 2024Update its policies and procedures to define how Ginnie Mae intends to identify and evaluate prospective buyers to ensure its ability to absorb the extinguished portfolio before executing the purchase and sale agreement.
Corrective Action Taken
Ginnie Mae updated its Rapid Relocation Extinguishment SOP to require an Impact Analysis Evaluation of each prospective buyer under the Rapid Relocation Extinguishment program. The Impact Analysis Evaluation mirrors similar activities performed on select standard Pool Transfer participants and includes details (such as adjusted net worth, delinquency, loan court and total unpaid principle balance) to confirm prospective buyers are able to absorb the extinguished portfolio before executing the purchase and sale agreement. We believe this guidance enhancement will help Ginnie Mae to reduce exposure to risk when facilitating a sale and transfer of a troubled issuer’s portfolio and ensure that it sells portfolios with limited loss to the Government and with minimal disruption to the mortgage market.
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Status2023-KC-0003-002-AOpenClosedClosed on June 27, 2023
Assesses what information Ginnie Mae needs from the MSS to ensure that they have the capacity for a large- or multiple-issuer extinguishment.
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Status2023-KC-0003-002-BOpenClosedClosed on June 27, 2023
Prescribes how the contracting officer representative will review information provided by the MSS and provide actionable feedback to ensure MSS readiness.