Early-Buyout securitization plan could stabilize the market and reduce costs for borrowers, says MBA

The Mortgage Bankers Association (MBA) has introduced a proposal to create a new Ginnie Mae securitization designed to help issuers navigate financial challenges during economic downturns.
The proposed Ginnie Mae Early-Buyout (EBO) securitization is designed to offer support to independent mortgage banks (IMBs) and other issuers by easing liquidity challenges while also benefiting borrowers with reduced costs.
Mortgage Bankers Association (MBA) president and CEO Bob Broeksmit said the proposed EBO securitization would address long-standing issues related to liquidity within Ginnie Mae’s program.
“[It] would expand liquidity for government servicing through all economic cycles,” Broeksmit said in a statement. “An EBO security addresses the timing mismatch within Ginnie Mae’s program, helping to alleviate an ongoing issue that has concerned issuers and regulators alike. It also has the potential to increase the value of Ginnie Mae servicing, which could translate into lower costs for FHA, VA, and USDA borrowers.”
How the EBO securitization works
Under the proposal, the EBO securitization would focus on loans backed by federal agencies such as the Federal Housing Administration (FHA), Veterans Affairs (VA), and the US Department of Agriculture (USDA).
When borrowers fall behind on payments, issuers are required to buy these loans out of Ginnie Mae pools to stop advancing principal and interest payments to investors. However, holding these non-performing loans can strain the financial resources of IMBs, which often lack the balance sheets to manage such obligations.
The EBO securitization would allow issuers to pool these non-performing loans into a new security that could then be sold to private investors. Investors would receive payments when the loans are resolved, either through borrower repayment, foreclosure, or federal guarantees provided by FHA, VA, or USDA. This mechanism would relieve issuers of the burden of holding these loans while maintaining financial stability in the Ginnie Mae program.
Key benefits
MBA outlined several advantages of the proposed EBO securitization.
By offloading non-performing loans, issuers can free up capital to continue lending, particularly to first-time and low- to moderate-income homebuyers. The structure would also attract private investors and warehouse lenders, boosting confidence and investment in the Ginnie Mae program.
The trade association noted that reduced costs for issuers could lead to lower borrowing costs for FHA, VA, and USDA borrowers, improving affordability in the housing market.
“An EBO securitization would expand liquidity for IMBs, who account for more than 85% of Ginnie Mae issuance, ensuring they have the ability to lend to first-time and low- and moderate-income homebuyers through all economic cycles,” Broeksmit explained, noting that Ginnie Mae already has the authority, funding, and resources to implement this proposal.
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The MBA’s white paper, Ginnie Mae EBO Securitization, explains the timing mismatch in Ginnie Mae’s program that often leaves issuers with liquidity concerns. The current requirement for issuers to advance principal and interest payments to investors, even for non-performing loans, has created financial stress for many IMBs.
The EBO securitization would mitigate these issues by providing issuers with an alternative source of liquidity.
The paper also highlights modeled pricing scenarios and discusses the benefits for various stakeholders, including issuers, investors, and consumers. According to the MBA, the initiative complements existing solutions and could enhance the overall stability of the housing finance system.
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