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CHLA Letter to FHA/Ginnie Mae Regarding FHA Loss Mitigation and Ginnie Mae Repolling

Wednesday, August 24, 2022
Media Contact: Scott Olson

Today the Community Home Lenders of America (CHLA) wrote a letter to FHA Commissioner Julia Gordon and Ginnie Mae President Alanna McCargo asking both to work together to develop changes to the FHA loss mitigation and Ginnie Mae loan re-pooling requirements, to address problems created by a rising interest rate environment.

CHLA Executive Director Scott Olson said in the letter, “Rising mortgage rates are creating problems for Ginnie Mae issuers carrying out loss mitigation for defaulted FHA borrowers. Typically, issuers implement loss mitigation by buying an FHA loan out of a Ginnie Mae pool, modifying the loan, and then selling the loan back into a Ginnie Mae pool.

“This was not a problem when mortgage rates were stable or falling. However, Ginnie Mae issuers are now facing two unpalatable options – either an increase in the mortgage rates that could make it difficult to carry out the loss mitigation or the re-sale of loans into Ginnie Mae pools at steep losses to the issuer.”

The letter also outlines a proposal by Ted Tozer, former President of Ginnie Mae, as to how loan guarantors should consider adopting waterfall for loans that would not require the buyout of the mortgage from the MBS pool or the loan’s note rate to be increased.

Read the letter here