Following
the

submission
of
a
letter
by
Indiana
Sen.
Mike
Braun
(R)
to


Ginnie
Mae
President
Alanna
McCargo
about
concerns
related
to
the
Home
Equity
Conversion
Mortgage
(HECM)-backed
Securities
(HMBS)
program,
McCargo’s
predecessor,
Ted
Tozer,
hopes
the
senator
will
dive
deeper
into
the
program’s
mechanics
and
what
led
to
the
collapse
of

Reverse
Mortgage
Funding
(RMF).

The

late
2022
failure
of
RMF
and
the
subsequent

assumption
of
its
reverse
mortgage
portfolio
by
Ginnie
Mae
were
major
concerns
for
Braun,
which
influenced
his
decision
to
inquire
about
the
program’s
challenges.

“RMF’s
failure
raised
serious
red
flags,”
Sen.
Braun
said

in
a
subsequent
email
to
RMD.
“The
scope
of
this
failure
is
glaring,
comprising
36
percent
of
all
existing
HECM
loans
at
the
time.
I
am
seeking
clarity
about
Ginnie
Mae’s
actions
in
dealing
with
this
distressed
issuer
and
their
actions
to
fix
underlying
programmatic
problems.”

In
an
interview
with
RMD,
Tozer
explained
that
his
major
concern
with
Braun’s
letter
is
that
the
senator
didn’t
characterize
what
he
says
is
the
actual
reason
for
Ginnie
Mae’s
assumption
of
the
company’s
portfolio.

“Ginnie
Mae,
like
any
creditor,
took
control
of
the
collateral
when
they
(RMF)
defaulted
on
their
debts,”
Tozer
said.
“This
is
to
protect
the
taxpayer.
RMF
was
obligated
to
make
payments
to
the
bondholder,
but
they
could
not
come
up
with
the
cash
to
facilitate
that
funding
and
defaulted.
Ginnie
Mae
had
no
choice
but
to
take
the
loans
as
collateral.”

But
Braun’s
letter
does
not
mention
the
intent
to
protect
U.S.
taxpayers,
Tozer
added.

“My
concern
is
he
didn’t
make
it
clear
that
Ginnie
Mae
was
stepping
in
to
protect
the
taxpayer,”
Tozer
explained.
“By
doing
this,
he
kind
of
threw
Ginnie
Mae
under
the
bus,
questioning
why
Ginnie
Mae
took
this
action
with
RMF.
I
think
that’s
the
thing
he
misunderstood.”

Braun’s
letter
also
requested
information
about
Ginnie
Mae’s
attempts
to
“market
RMF’s
assets
to
potential
buyers,”
and
to
explain
details
about
challenges
the
company
encountered
in
locating
a
financier
for
RMF.

“Ginnie
Mae
did
that,”
he
said.
“They
tried
to
find
people
willing
to
take
over
the
debt
obligations
and
the
underlying
collateral,
but
as
I
understand
it,
every
other
HMBS
issuer
was
having
enough
problems
obtaining
liquidity
for
the
98%
buyouts,
and
they
didn’t
want
to
take
on
additional
obligations.”

Braun
noted
that
Ginnie
Mae
had
never
before
extinguished
an
issuer
from
the
HMBS
program,
but
Tozer
contends
that’s
not
the
issue
at
the
heart
of
the
matter.

“The
issue
was
not
the
fact
that
Ginnie
Mae
did
the
extinguishment,”
he
said.
“The
problem
is
that
the
HMBS
program
is
so
cash-intensive
for
older
HECMs
that
hit
the
98%
threshold,
and
[independent
mortgage
banks
(IMBs)]
just
don’t
have
the
financing
facilities
to
handle
those
buyouts.”

Tozer
said
he
interpreted
some
of
the
letter’s
content
to
be
disfavorable
to
the
actions
Ginnie
Mae
has
taken
to
protect
both
the
HMBS
program
and
taxpayers.

“[The
letter]
made
it
sound
like
Ginnie
Mae
was
just
sitting
back
and
not
doing
anything,
but
it’s
back
to
the
fact
that
the
IMBs
are
the
only
ones
doing
HMBS,”
he
said.
“It’s
a
very
cash-intensive
business,
and
IMBs
just
don’t
have
the
financial
wherewithal
that
depositories
do
to
raise
a
lot
of
cash
to
meet
their
obligations.”

Tozer
hopes
that
Ginnie
Mae
can
explain
this
to
Braun
in
its
own
response,
but
he
has
also
personally
reached
out
to
the
senator’s
office
to
offer
any
information
he
may
need.
When
asked
about
the
interaction,
Tozer
said
he
was
satisfied
that
the
senator’s
office
understood
his
concerns.

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