The Office of Inspector General (OIG) at the U.S. Department of Housing and Urban Development (HUD) has launched an investigation into Ginnie Mae’s handling of Reverse Mortgage Funding’s (RMF) bankruptcy and servicing seizure. The investigation is focusing on compliance with laws and regulations.
The counterparty risk associated with Ginnie Mae’s $2.4 trillion mortgage-backed securities portfolio, including the Home Equity Conversion Mortgage (HECM) market subset, is raising significant concern. The seizure has led to a legal challenge by a warehouse lender against Ginnie Mae for allegedly canceling liens on collateral worth millions after Texas Capital Bancshares (NASDAQ:) provided RMF with emergency funding.
Both Ginnie Mae and the Federal Housing Administration (FHA), arms of HUD, play crucial roles in ensuring securitized loan payments reach borrowers and insuring loans that collateralize Ginnie’s bonds.
In response to the ongoing issues, the FHA has proposed policy changes intended to make reverse mortgage servicing more attractive. These include incentives for foreclosure prevention measures and expense coverage, aiming to boost participation in the HECM program.
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