First launched in April of 2020, the Pass-Through Assistance Program (PTAP) was an important initiative designed to provide mortgage servicers with the liquidity needed to endure the financial challenges due to the COVID-19 pandemic. As millions of borrowers struggled to meet their mortgage payments, PTAP served as a lifeline, ensuring that servicers could meet their obligations to investors. Today, this program is poised to play an even more important role in the face of ongoing economic challenges. However, to embrace its full potential, PTAP needs a facelift.
The Financial Stability Oversight Council (FSOC) has recommended that Congress consider expanding PTAP into a robust “liquidity backstop” for mortgage servicers during periods of market stress. This move could stabilize servicers, provide necessary liquidity support, mitigate risks, preserve servicing rights, bolster small lenders, and enhance warehouse lender confidence.
However, the PTAP’s current limitations—restrictive eligibility requirements, insufficient education about benefits, stigmas surrounding its use, inadequate legislative support, and high borrowing rates—undermine its potential.
The backbone of the housing market
We recognize that Independent Mortgage Banks (IMBs) are the backbone of the housing finance ecosystem and are responsible for most Ginnie Mae loans. Despite their crucial role, the current PTAP structure does not adequately support these smaller players. Strict eligibility requirements can exclude many IMBs, limiting their access to essential liquidity during times of financial stress. This exclusion hampers the ability of IMBs to serve their communities and undermines the broader stability of the housing market.
Flexibility and access to liquidity are essential for IMBs to navigate economic downturns. Expanding the program’s eligibility requirements would allow more IMBs to access the program when needed, ensuring they can continue to operate during economic challenges. This would reinforce Ginnie Mae’s mission to promote competition and consumer choice in the mortgage market.
Keeping PTAP crisis ready
It is important to stress that PTAP should be reserved exclusively during periods of significant financial distress and by high-performing, well-regulated IMBs. The program’s primary purpose is to act as a safety net during crises, not as a regular source of funding. This distinction protects the integrity of the program and maintains confidence among warehouse lenders and investors, who play a key role in the mortgage industry.
Legislative support
In addition to expanding access, we believe that Congress should grant Ginnie Mae greater flexibility in adjusting the PTAP terms and conditions. This would allow the program to be more responsive to changing market dynamics and the evolving needs of lenders. For instance, more lenient terms for Mortgage Servicing Rights (MSRs) transfers could be implemented to better support issuers facing short-term liquidity issues. Such flexibility would not only increase confidence among warehouse lenders but also help support struggling issuers. An expanded PTAP would act as a safety net, ensuring that small nonbank lenders can continue to participate in the mortgage market.
It is also crucial to shift the narrative around PTAP from a last-resort option to a proactive tool that can be effectively leveraged during a crisis. Increased awareness and education about PTAP’s benefits could help reframe it as an essential component of a resilient mortgage market. A more widely used PTAP would inspire confidence within the industry and contribute to overall market stability, reducing the risk of broader economic crises.
Moving forward
Expanding and improving the PTAP program is a straightforward way to support IMBs and other mortgage servicers during tough economic times. By expanding access, increasing flexibility, and better educating stakeholders, PTAP can become a more effective tool for maintaining market stability.
At Atlantic Bay Mortgage Group, we advocate for a stronger, more flexible PTAP. We call on policymakers to expand and enhance the program to better support the housing market. With joint action and intentional reforms, PTAP can serve its intended purpose during financial crises and safeguard the future of homeownership for all Americans.
Morgan Wise is the Chief Financial Officer of Atlantic Bay Mortgage Group.
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