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Additional Changes to Ginnie Net Worth Minimums

Mortgage News

Issuers of multifamily mortgage-backed securities that are guaranteed by the Government National Mortgage Association face more increases to net worth requirements.

Last month, the Washington, D.C.-based firm issued a memorandum that included an increase in the required minimum base net worth to $1 million from $500,000. The revised minimum impacts all new multifamily issuers. Existing multifamily issuers have until May 1, 2011, to comply.

On Thursday, Ginnie Mae said that multifamily issuers with outstanding MBS and commitment authority to issue new securities between $25 million and $175 million will need to have an additional 1 percent in base net worth. On any amount exceeding $175 million, an additional 0.2 percent will be required.

A new requirement has liquid assets needing to account for 20 percent of the net worth. The deadline for meeting this requirement is Oct. 1, 2011 — the beginning of the government-owned corporation’s fiscal year.

Also effective next October are new capital requirements that “match those of institutions considered to be ‘well-capitalized’ by bank and thrift regulatory agencies.” For non-banks, credit unions and subsidiaries, the capital requirement will be 6 percent of total equity over total assets.

For banks and thrifts, the ratios will be 5 percent of tier-1 capital over total assets, 6 percent of tier-1 capital over risk-based assets, and 10 percent of total capital over risk-based assets.

Ginnie said it is making the changes to “better align with the rapidly changing housing finance market.”

In October, Ginnie issued a bulletin indicating that all participants in its single-family program would be subject to new financial requirements — including a minimum base net worth of $2.5 million, up from $1 million.

In February, the government-owned corporation issued a bulletin indicating that existing MBS issuers and HMBS issuers would be subject to a $1 million net worth requirement as of Oct. 1. New issuers were subject to the increased requirements back in October 2008.

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