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We identified gaps in Ginnie Mae’s guidance and process for troubled issuers.  Ginnie Mae made progress in developing an issuer default governance framework, but has not (1) defined its authorities for marketing troubled portfolios; (2) formalized guidance for how to identify potential buyers before extinguishment; (3) established expectations for determining portfolio value, price before sale, and evaluation against other options or (4) included a step to evaluate prospective purchasers’ ability to absorb an extinguished portfolio.  Additionally, we found Ginnie Mae had implemented our previous recommendation to develop and implement controls to determine the total impact of a large- or multiple-issuer default, the maximum-size default Ginnie Mae could adequately execute, and individual issuers’ ability to adapt to changing market conditions, but there was a gap related to the semiannual capacity reports submitted by master subservicers (MSS).

Recommendation Status Date Issued Summary
2023-KC-0003-001-A Cerrado Marzo 28, 2023

Update its policy and procedures to define its authority for marketing troubled issuer portfolios and the conditions that must exist to extinguish issuers using rapid relocation.


Corrective Action Taken

As of February 2024, HUD addressed this recommendation in a Management Decision by providing the updated extinguishment SOP, the Rapid Relocation Process Flow, and the Rapid Relocation Extinguishment Process Steps, updated to include the conditions that must be present to execute an extinguishment using rapid relocation. We believe that these guidance enhancements will help Ginnie Mae to reduce exposure to risk when facilitating a sale and transfer of a troubled issuer’s portfolio and ensure that it sells portfolios with limited loss to the Government and with minimal disruption to the mortgage market.

2023-KC-0003-001-B Abierta Marzo 28, 2023

Update its policy and procedures to define what type of information Ginnie Mae may disclose and how it will handle protected information before extinguishment.


Status

Ginnie Mae planned to incorporate the existing Ginnie Mae Confidential Information Policy into its Default Playbook and identify and log information that can be selectively shared in rapid relocation execution. The final action target date is May 30, 2024. As of March 6, Ginnie Mae is still on target for meeting this date.


Analysis

To fully address this recommendation, Ginnie Mae must provide evidence that it has updated its policies and procedures to define what type of information it may disclose and how it will handle protected information before extinguishment. Ginnie Mae stated that it is currently on track to fully address the recommendation on time.

Implementation of this recommendation will result in Ginnie Mae more effectively protecting its portfolio.

2023-KC-0003-001-C Abierta Marzo 28, 2023

Update its Policies and procedures to define how Ginnie Mae will determine the portfolio value and price before Sale.


Status

Ginnie Mae planned to incorporate the existing Ginnie Mae Confidential Information Policy into its Default Playbook and identify and log information that can be selectively shared in rapid relocation execution. The final action target date is May 30, 2024. As of March 6, Ginnie Mae is still on target for meeting this date.


Analysis

To fully address this recommendation, Ginnie Mae must provide evidence that it has updated its policies and procedures to define what type of information it may disclose and how it will handle protected information before extinguishment. Ginnie Mae stated that it is currently on track to fully address the recommendation on time.

Implementation of this recommendation will result in Ginnie Mae more effectively protecting its portfolio.

2023-KC-0003-001-D Abierta Marzo 28, 2023

Update its policies and procedures to define how Ginnie Mae intends to identify and evaluate prospective buyers to ensure its ability to absorb the extinguished portfolio before executing the purchase and sale agreement.


Status

Ginnie Mae planned to incorporate impact analysis evaluation of each prospective buyer to confirm compliance post-transfer. This will include key portfolio indicators and will mirror similar activities currently performed on select standard pool transfer participants. The final action target date is May 30, 2024. As of March 6, Ginnie Mae is still on target for meeting this date.


Analysis

To fully address this recommendation, Ginnie Mae must provide evidence that it has updated its policies and procedures to define how it intends to identify and evaluate prospective buyers to ensure its ability to absorb the extinguished portfolio before executing the purchase and sale agreement. Ginnie Mae stated that it is currently on track to fully address the recommendation on time.

Implementation of this recommendation will result in Ginnie Mae more effectively protecting its portfolio.

2023-KC-0003-002-A Cerrado Marzo 28, 2023 Assesses what information Ginnie Mae needs from the MSS to ensure that they have the capacity for a large- or multiple-issuer extinguishment.
2023-KC-0003-002-B Cerrado Marzo 28, 2023 Prescribes how the contracting officer representative will review information provided by the MSS and provide actionable feedback to ensure MSS readiness.