Mortgage subservicing: What is it, and how can it work for my CU?

Ginnie Mae should treat credit unions as ‘depository institutions’

August 9, 2021

It’s time for Ginnie Mae to reassess its exclusion of credit unions from the definition of “depository institutions,” CUNA wrote to Ginnie Mae Monday. CUNA’s comments were sent in response to a Ginnie Mae request for information (RFI) on single family mortgage backed security issuers.

“While not explicitly stated anywhere in the RFI, Ginnie Mae has long excluded credit unions from the definitions of “depository institutions “and “banks.” This treatment has no statutory basis and Ginnie Mae has not publicly offered any policy explanation for this treatment,” the letter reads. “In light of Ginnie Mae’s focus on aligning its eligibility requirements for issuers with the actual risks and activities taken on by its mortgage lenders, it is time for Ginnie Mae to reassess this approach.”

CUNA adds that grouping credit unions with nonbank mortgage lenders “directly contravenes Ginnie Mae’s stated principles in the RFI.

“Credit unions exist only to serve their members, and the relationship between credit unions and their members is fundamentally stronger than the relationship other financial services companies have with their customers,” the letter reads. “As a result, credit unions’ interest in their members’ financial wellbeing and advancing the communities they serve takes on paramount importance.”

The letter also notes:

Credit union mortgage loans are generally high in quality and low in risk, with lower delinquency rates than banks.

  • Ginnie Mae’s statement that “nonbanks are less stringently regulated” is not accurate with regard to credit unions, as credit unions are subject to significant capital, liquidity, and other requirements.
  • Credit unions have broader and more stable access to liquidity than nonbank lenders.
  • Credit unions assets are diversified and they are regularly examined for concentration risk.