Ginnie Mae and the Federal Housing Finance Agency must take steps to better assess the funding risks of the nonbank mortgage companies that they monitor, the Government Accountability Office concluded in a new report.
Nonbanks currently originate and service most loans in the more than $9 trillion in securities guaranteed by Ginnie Mae, a government-owned enterprise, and by Fannie Mae and Freddie Mac, which are under FHFA conservatorship, according to the GAO. “The failure of a large nonbank — or multiple smaller ones — could disrupt mortgage markets and increase federal fiscal exposure.”
Ginnie Mae and FHFA have processes to assess the financial condition of nonbanks, but opportunities exist to enhance those processes, the report concluded. For example, FHFA does not have written procedures to assess the reliability of self-reported data from nonbanks. Also, Ginnie Mae and FHFA may not be fully considering certain key risks used to place nonbanks on their watch lists.
GAO recommended that FHFA develop procedures to assess the reliability of nonbank data it uses for monitoring; that FHFA and Ginnie Mae improve their processes for assessing risks of nonbank use of short-term credit lines; and that Ginnie Mae consider additional nonbank stress scenarios. FHFA and Ginnie Mae agreed with GAO’s recommendations, according to the report.
