CHLA Letter to Ginnie Mae:  Recommendations for More Robust, Permanent PTAP Program

The Community Home Lenders of America (CHLA) today sent a letter to Ginnie Mae President Alanna McCargo, making detailed recommendations for a “more robust, flexible, and permanent”  PTAP program.

The CHLA recommendations would help independent mortgage banks (IMBs) carry out their role as bankers in making advances on Ginnie Mae mortgage backed securities when borrowers default on FHA, VA, and RHS mortgage loans.

The letter stated that an expanded PTAP program should include the following uses:

1.     Preserving solvent issuers with short-term liquidity concerns.  

2.     Using PTAP during financial crises or periods of above-average mortgage default rates.

3.     Delaying MSR transfers of a troubled issuer as needed for a better financial resolution.

Referencing Ginnie Mae President McCargo’s quote last year in which she cited ”. . . the importance of increasing access to Ginnie Mae for small nonbanks in order to narrow a gender gap in homeownership.”  the CHLA letter argued that PTAP should be used to help solvent IMB issuers make advances, in order to maintain a broad base of smaller issuers.  This would increase competition and consumer choice, particularly at a time when banks like Wells Fargo are exiting the correspondent loan business.

The CHLA letter argues that Ginnie Mae issuers are “essentially acting as a banker to borrowers that miss mortgage payments, by making required advances” – but that IMB don’t have the funding and liquidity sources that banks enjoy, such as FDIC insurance, FHLB bank advances, and access to the Fed window.    

CHLA’s letter also provided detailed recommendations on how Ginnie Mae could responsibly expand PTAP to help issuers, respond to future financial crises similar to COVID-19, and in certain circumstances reduce Ginnie Mae resolution costs by delaying MSR takeovers or firesale portfolio sales to a better time.