Ginnie Mae Faces Legal Challenge Over Handling of RMF Bankruptcy

The Office of Inspector General (OIG) at the U.S. Department of Housing and Urban Development (HUD) has initiated an investigation into Ginnie Mae’s management of Reverse Mortgage Funding’s (RMF) bankruptcy and its associated servicing seizure. The focus of the investigation is on compliance with existing laws and regulations.

Concerns are escalating regarding the counterparty risk associated with Ginnie Mae’s extensive $2.4 trillion mortgage-backed securities portfolio, particularly the subset that includes Home Equity Conversion Mortgages (HECM). The recent seizure has triggered a legal dispute with a warehouse lender, who claims that Ginnie Mae improperly canceled liens on collateral valued at millions following emergency funding provided to RMF by Texas Capital Bancshares.

Both Ginnie Mae and the Federal Housing Administration (FHA), which operate under HUD, are essential in ensuring that payments on securitized loans reach borrowers and in insuring the loans that secure Ginnie Mae’s bonds.

In light of these ongoing challenges, the FHA has proposed policy adjustments aimed at making reverse mortgage servicing more appealing. These proposals include incentives for foreclosure prevention measures and coverage of associated expenses, with the goal of increasing participation in the HECM program.

This article was generated with AI assistance and reviewed by an editor.