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NAFCU Regulatory Affairs Counsel Aminah Moore Friday wrote to the Federal Housing Finance Agency (FHFA) regarding its re-proposed rule requiring all government-sponsored entities (GSE) seller and servicers, depository and non-depository, to maintain a tangible net worth requirement of $2.5 million, plus 35 basis points (bps) for the unpaid principal balance for Ginnie Mae servicing.

The rule would also require GSE sellers and servicers to maintain an additional 25 bps for all other 1-4 unit residential loans serviced, including GSE loans, and modifies the definition of tangible net worth by subtracting deferred tax assets. 

NAFCU is generally supportive of the proposal and its changes but urges the FHFA to raise the capital ratio requirement for non-depository seller/servicers to 10 percent and clarify some of the requirements for large non-depository seller/servicers.

“The FHFA must impose more specific capital and liquidity requirements on its counterparties as part of its risk management process,” wrote Moore. “Non-depository financial institutions are not regulated by a prudential federal regulator but are subject to regulation by state supervisory authorities, which may vary state by state and may not include capital and liquidity standards.”

The FHFA’s proposal further defines a large non-depository seller/servicers as a non-depository institution with $50 billion or more in total single-family servicing unpaid principal balance at the end of any quarter, where the servicer is the master of record. It also requires a large non-depository seller/servicers to establish a liquidity that can be drawn on during times of duress, submit capital and liquidity plans that include mortgage servicing rights and stress tests, and obtain third-party ratings.                                                                                                                 

Other key changes to the requirement under the re-proposed rule include:

• all non-depository seller/servicers are required to have a minimum capital ratio of nine percent; 
• liquidity requirements vary by remittance type and no longer require a nonperforming loan incremental charge; and
• an origination liquidity charge is added to capture liquidity needed for sellers to meet margin calls. 

Read the full letter. NAFCU remains engaged with the FHFA on this proposed rule and will keep members updated on any key movements.