UPDATE Ginnie Mae clarifies first payment basis intended by APM 21-06

David Shirk - Shirk Law
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David Shirk - Shirk Law

Yesterday, Ginnie Mae clarified in an industry forum that its APM 21-06 seasoning requirements for the VA IRRRL Refinance of a Modified Loan are measured from the contracted first payment due date under a modification agreement. This arises in cases where the VA loan being refinanced has been modified and re-pooled.

Ginnie Mae communications have always emphasized that seasoning is designed to protect bondholders of the pool. Ginnie Mae staff have previously indicated in buyout conversations that it measured seasoning from the first payment under the pool. APM 21-06 was unclear which payment would be relied upon in cases where the first payment under the pool was later than the contracted first payment date on the note or modification agreement. The clarification was welcomed and aligns with the plain language of the MBS Guide.

VA IRRRL seasoning requirements specify that before the refinance note date or date the loan was originated there must have been 6 consecutive monthly payments made and 210 days must have passed since the first payment due date of the loan being refinanced. APM 21-06 clarifies that Ginnie Mae considers a modification agreement that required re-pooling of the underlying loan to be a new loan that requires seasoning from the first payment date under the modification agreement.

As early as the Summer of 2020 and at least until September 2021, Ginnie Mae had sent buyout notices to issuers based on these policies that surprised many issuers who measured seasoning from the original first payment date of the loan being refinanced without respect to the modification. APM 21-06 therefore clarifies that beginning January 1, 2022, Ginnie Mae considers a modification that requires re-pooling to be a new loan that establishes a new seasoning first payment date with respect to VA IRRRL pooling requirements. The January 1, 2022, effective date is welcome news to issuers that faced buyout notices for loans that had an intervening modification.

This is the third of three articles on the subject, putting to rest the outstanding questions on the matter.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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