The reverse mortgage industry has been anticipating the development of a new, complementary Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) program designed to further address liquidity issues in the aftermath of the collapse of a major lender and issuer.
But following the results of the 2024 presidential election, the implementation of “HMBS 2.0” and other potential priorities sought by current leaders could be in flux through no fault of Ginnie Mae, the government-owned company that oversees the forward and reverse mortgage-backed securities programs. There are also other in-development policies in other areas of the government to consider.
Ginnie Mae shakeup
Prominent resignations of leading officials, and statements from president-elect Donald Trump’s congressional allies, could lead to slowed movement on some in-progress policy fronts. These may include housing broadly and HMBS 2.0 specifically.
One of the most obvious potential speed bumps to the implementation of the HMBS complement is the recently announced resignation of Sam Valverde, Ginnie Mae’s current acting president. Valverde stepped into the leadership role in May following the resignation of Alanna McCargo.
Valverde has been a prominent point person as Ginnie Mae has been developing HMBS 2.0, announcing some of its key provisions and offering a potential timeline for the release of an updated term sheet. Steve Irwin, president of the National Reverse Mortgage Lenders Association (NRMLA), recently recognized Valverde for these efforts in a weekly email update to the association’s membership.
“On behalf of NRMLA, I wish to extend our appreciation to Sam Valverde for his steadfast support and leadership in developing HMBS 2.0 these past several months,” Irwin wrote. “We wish him the best of luck with his future plans.”
While the term sheet could still be released sometime this month prior to his exit, Valverde’s resignation goes into effect Nov. 30, leaving nearly two months before the presidential transition takes place on Jan. 20, 2025. And this timeline will be slightly truncated by the holiday season.
While a successor to Valverde has been named in the form of longtime Ginnie Mae senior vice president Gregory Keith, things could be complicated further by the position of certain congressional leaders in the run-up to the inauguration.
The presidential transition
Sen. Tim Scott (R-S.C.), an upper-chamber ally of Trump, recently submitted a letter to President Joe Biden urging that his administration cease policymaking and personnel nomination activities for the remainder of his term in office.
The letter was also sent to current cabinet secretaries and agency heads such as Adrianne Todman, acting secretary for the U.S. Department of Housing and Urban Development (HUD), and Sandra Thompson, director of the Federal Housing Finance Agency (FHFA).
“As the top Republican on the Senate Committee on Banking, Housing and Urban Affairs, I call on the agencies overseen by the committee to cease all rulemaking, including the finalization of any pending or proposed regulations or guidance, and to comply with federal record retention laws and preserve all agency documents, records and communication,” Scott wrote in the letter.
Scott added a “demand” that all pending nominations taking place at the agencies and overseen by the committee be withdrawn. He advised Biden that he “will not vote for, or advance, any nominees put forth in front of the committee by [the Biden] administration.”
“To ensure the Trump administration’s success, the Biden administration should cease all rulemaking and withdraw nominations before [the Senate Banking Committee],” Scott added.
Federal banking regulators have already signaled that they will follow this line of thinking, according to reporting by Politico.
Another tangential reality that could affect either the implementation or continuation of certain housing policies comes from the transition itself. As of Friday, according to reporting at USA Today, Trump has not signed the necessary legal documentation with the General Services Administration (GSA) or the White House to begin the transition process. This allows for security clearances and briefings for incoming officials ahead of Inauguration Day.
White House press secretary Karine Jean-Pierre noted in a recent press briefing that the Biden administration is ready to begin the process once the required documents are signed.
“We’re going to continue to engage with the Trump transition team to ensure that we do have that efficient, effective transition of power,” Jean-Pierre said. “We stand ready to provide assistance and access to services and information” that is typically delineated in the required documents, she added.
Expert perspectives
Scott Olson, executive director of the Community Home Lenders of America (CHLA), was asked about the likelihood of work like HMBS 2.0 being held up during the transition. Olson said there could be multiple reasons why prospective policy decisions are delayed — some of which are perfectly justified.
“It’s understandable that there will be calls from Congress, and you might even see the White House — I think the Trump administration did this eight years ago at the start — to put a temporary freeze on new regulations,” he said. “Pausing while you figure out what you want to do is fine, but things always change. As a general rule, we would hope that pause wouldn’t last too long, because there are things that everyone agrees need to be fixed.”
The letter from Scott could be an example of this, Olson said, but if it leads to outright inaction, then that’s where a problem may emerge.
“You have to have an outlet to move forward on the things that there’s an agreement to address,” Olson said. “We understand if you want to take a pause, look at what you’re doing, and see where you might want to shift gears. But we don’t want to be in a stalemate, because there are always things that can be improved.
The HMBS program is a smaller portion of the $2 trillion portfolio overseen by Ginnie Mae, but it could have an outsized impact, according to Michael Bright, former acting president of Ginnie Mae during the first Trump administration.
During his time at Ginnie Mae, Bright said the HMBS portfolio was very volatile and subsequently generated a lot of “noise” in the Mutual Mortgage Insurance (MMI) Fund.
“One thing that global investors have gotten very good at doing is trying to get ahead of any predictions for mortgage insurance premium changes by FHA because of its impact on prepayment speeds,” Bright said. “MIP changes are tethered to the strength of the insurance fund, which itself is linked to the volatility of HECM — it plays a disproportionate role in impacting what’s shown in the insurance fund.”
