Ginnie Mae’s Proposed Eligibility Requirements for Single-Family Issuers

Brief

Ginnie Mae’s Proposed Eligibility Requirements for Single-Family Issuers

The Proposal Is Too Punitive and Detrimental for Nonbank Liquidity

Abstract

In this brief, the authors analyze Ginnie Mae’s request for input (RFI) on issuer eligibility. While some provisions of the RFI are well-balanced, others can have a very detrimental impact nonbank issuer liquidity. In particular, the subtraction of excess MSRs from adjusted net worth is very punitive. This would disincentivize issuers from holding excess MSRs, which can be a source of liquidity. The authors argue that all MSRs should be held to the same 250 percent risk weight. Other recommendations include assigning lower risk-weights to hedged MSRs and held-for-sale loans and counting some term debt as capital. Ultimately authors argue that while enhanced regulation of nonbanks is desirable, access to federal liquidity facility is the most effective way to mitigate liquidity concerns.

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