The firm is contemplating selling off its servicing rights for loans backed by Government National Mortgage Association (Ginnie Mae) mortgages. This could signal a major change for the mortgage market, as servicers of Ginnie Mae mortgage products are traditionally focused on the higher-risk segment of the borrower population.
The news of Home Point's potential divestment of its Ginnie Mae servicing rights has caused speculation over how it will impact the larger mortgage market. Home Point is one of the largest non-bank mortgage servicers, and its move to unload its Ginnie Mae rights could signify an effort to focus more heavily on other aspects of the market.
The Ginnie Mae program was created by Congress in 1968 with the intention of providing federally insured mortgage loans to veterans, first-time homebuyers, and other people who may have difficulty accessing conventional financing. Ginnie Mae guaranty insurance helps lenders take on riskier loans, as the Federal Housing Administration or Department of Veterans Affairs guarantees the loans against default. However, these high-risk loans also carry higher interest rates, making them less attractive to many lenders.
Servicers of Ginnie Mae mortgage products must have a long track record of managing large portfolios of government-guaranteed loans for low-income borrowers, as well as a number of other capabilities, such as delinquent loan management and foreclosure initiation. Home Point, which services over $17 billion in residential mortgage loans, may have decided that servicing these particular loans is not in line with its core business.
Another factor that could have led to this potential sale is the new Qualified Mortgage (QM) rules put in place by the Consumer Financial Protection Bureau earlier this year. The QM regulations require lenders to prove that borrowers can pay their loans back, meaning that lenders have become much more risk-averse than before. This means that the demand for Ginnie Mae loans may be reduced, as lenders are now much more likely to offer less risky products.
This potential shift in the Ginnie Mae market will affect both lenders and borrowers. Lenders may be less willing to offer Ginnie Mae loans, leaving borrowers with fewer options when trying to obtain financing. As for Home Point, it is unclear what their plans are beyond considering the sale of their Ginnie Mae servicing rights. It is possible that the company will use this move as a way of refocusing its energy on more profitable loans, such as conforming and non-conforming mortgages.
To sum up, Home Point Financial Corporation is weighing the possibility of selling off its Ginnie Mae servicing rights. This move could be a part of its strategy to focus on other aspects of the mortgage market. Additionally, it may be in response to the tightening of lending standards following the implementation of the QM rules, as banks are now less likely to offer Ginnie Mae loans. If Home Point does indeed go through with this decision, it could have a significant impact on both lenders and borrowers, as fewer options for obtaining financing could result from this strategic shift.
This article was contributed on Nov 13, 2023
