Ginnie Mae expands leeway in taking motion on mortgage defaults

Ginnie Mae extended the relief for a third time to address the impact of forbearance on mortgage lenders' ability to meet typical default thresholds and to move the deadline further into next year.

The insurer of securitisations backed by certain types of government loans gives issuers an additional six months of leeway on mortgages taken out on or after April 2020 to accommodate temporary suspension of payments offered to borrowers with pandemic hardship.

The move suggests that Ginnie doesn't expect credit performance to return to normal levels until next summer. A wave of deferrals is imminent, but some officials have called for some deadlines to be extended in connection with pandemic-related payment facilities.

"Ginnie Mae will automatically provide this exclusion by July 31, 2022 for issuers who have met the default interest thresholds, as indicated in their April 2020 investor accounting report," said a memorandum released on Monday.

The April 2020 investor accounting report reflects the March 2020 mortgage performance data. March 2020 marks the month when coronavirus infections only just began to spread in the United States. Ginnie, a branch of the Department of Housing and Urban Development, originally set the temporary relief for late payment thresholds for December 31, 2020. Before the last extension, the discharge should end by January 31, 2021.

The Federal Housing Administration and Department of Veterans Affairs loans, evidenced by transactions that Ginnie insures, account for more than 40% of the forbearance in the market, according to Black Knight's latest weekly report. At the last count, FHA and VA loans accounted for 650,000 of the more than 1.6 million outstanding deferrals.

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