Remarks by Ronald A. Rosenfeld at the Ginnie Mae Investors Symposium on Fixed Income Investment Outlook

 

New York, NY

March 25, 2003

 

Thanks for that introduction, Jim.

 

And thank you, everyone, for taking the time to come to the Ginnie Mae Investors' Symposium. It's always nice for me to meet the people that make our business work.

 

You know, at Ginnie Mae we like to think of ourselves as the small company that can — most of you know that we've only been around for some 30-odd years.

 

But in that time think of what we have been able to accomplish!

 

By creating the first mortgage-backed securities, Ginnie Mae literally created the secondary mortgage market as we know it today.

 

And as many of you know, the mortgage sector of the debt market is today by far the largest in the world — at more than $5 trillion it surpasses all consumer debt, bank commercial loans and corporate debt combined.

 

In fact, the market for mortgage-backed securities (MBS) is one-third larger than the market for U.S. Treasury bonds.

 

I really believe that Ginnie Mae is what government should be — the public sector partnering with the private sector to not only deliver a high-quality product, but to help millions of Americans lead more secure lives.

 

To be exact, Ginnie Mae has helped more than 28 million Americans buy their own homes. Twenty-eight million — quite an accomplishment for a government agency of less than 75 people.

Of course, we can't do this work without our business partners, so let me take this opportunity to thank you for your interest and your participation in Ginnie Mae programs.

 

I don't think I need to tell any of you that these are difficult times we are in.

 

American ideals are being tested, not only abroad, but right here at home — because it is in difficult times that government must live up to its responsibility to citizens that need help the most.

 

We are, all of us, lucky to have a safe place to call home. But again, it is in these difficult times that we must all work harder than ever to make sure more Americans can cross the threshold to homeownership.

 

At Ginnie Mae, we take this mandate to heart.

 

So today, I'm pleased to announce a number of programs that will enable Ginnie Mae — and you — to help more Americans gain access to affordable housing — and I think we've managed to improve our programs in the process.

 

I want to start with action we're taking on targeted lending.

 

As you heard from Secretary Martinez this morning, our Targeted Lending Initiative, or TLI, has been in place for half a dozen years. Since its inception, we've turned the stuff of 100,000 dreams into the reality of 100,000 new, American households.

TLI's reduced guaranty fees and increased servicing fees are encouraging lending in areas that most need it: underserved central city areas and sovereign Native American lands.

Now, we're going a step further — opening our arms and the might of lending to a badly neglected portion of the population.

I'm very pleased to report that, at the request of Secretary Martinez, Ginnie Mae will expand TLI's geographic reach by starting to follow the confirmed data from the 2000 census.

 

This will bring the power of targeted lending to entirely overlooked portions of the populace — including the colonias along the U.S.-Mexico border, which have urgent requirements for safe, sanitary housing and the basic needs many of us take for granted.

 

This lending expansion supports the President's and HUD's goals. It is a winner for us — where people needing resources get access to them — and for you — where the insured loan pool gets larger and your fees, in turn, may get smaller.

 

Next, I want to describe a powerful new instrument in our homeownership toolbox. It shows our commitment to creative solutions — as well as demonstrating our commitment to listen to our investors.

 

Starting October 1st, Ginnie Mae will add to our portfolio of loan products — offering a new program that pools FHA's Hybrid 3-, 5-, 7- and 10-year ARMs and the Department of Veterans Affairs new 3-year Hybrid ARM.

 

The new products will offer borrowers a fixed interest rate for a certain period, followed by a capped, adjustable rate. We forecast that as many as 40,000 families will benefit from the new Hybrid ARM program — especially first time homebuyers and the families of active veterans.

 

Just as important, it will offer Ginnie Mae investors a high-quality, short duration investment product — another way to invest in Ginnie Mae.

 

Finally, I'd like to discuss an issue that has been in the news quite a bit lately — disclosures.

 

And I understand why people are concerned — it's one thing to know your house is secure — but you also need to know the integrity of the foundation it rests on.

 

As you know, the Department of the Treasury, the Office of Federal Housing Enterprise Oversight, and the Securities and Exchange Commission formed a joint task force last August to study disclosures on mortgage-backed securities offerings. The task force did so because the structure of MBS products had evolved to new levels of complexity. It appeared time to re-evaluate the fundamentals on which investors were making their decisions.

 

In the current business climate, their findings are no surprise. The task force ultimately found that additional pool-level disclosures "would be both useful and feasible."

 

We agree. Sunlight encourages growth — and that is why Ginnie Mae's guaranty fee has been, and will always be, completely transparent. We know that disclosure is good for the investor's state of mind.

 

Still, in today's environment, we need to do more. No legacy is as rich as honesty — and additional levels of disclosure will allow MBS investors to know more about the behavior of the underlying mortgages and, so, further enable investment. 

 

That is why, by January 2004, Ginnie Mae will begin providing new levels of transparency and disclosure — providing loan-to-value ratios, debt ratios, and, where possible, FICO scores on our post-settlement tapes. We think this additional clarity will help you see your way clear to a better investment product. 

 

You know, in times of challenge, Americans demand more from their government — as well they should. But for the steps I've outlined to be implemented in meaningful, lasting ways, we need to demand more from Wall Street as well.

 

Our meeting here is emblematic of a great American success story — the government and private sector working together for the good of the American people. The initiatives I've outlined today are critical, moving parts in our answer to the challenge President Bush has laid before us: five-and-a-half million more minority homeowners by the end of the decade.

 

At Ginnie Mae, we're doing our darndest to make sure the President's vision becomes a reality — but again, we can't do it without you.

 

We all know our work is not done. We have foundations to pour.

 

We have walls to build. We have roofs to raise.

 

We have Americans to bring home.

 

Thank you again for being here today.

And now I'd like to introduce our keynote speaker, Assistant Secretary of the Treasury, Wayne Abernathy.​