Nowhere are the implications of these trends more clearly felt than at Ginnie Mae, a government-owned corporation that makes it possible for lenders to continue to fund mortgages for lower- and middle-class families as well as military veterans possible. We do this through FDIC-like capabilities, using the full faith and credit of the United States to make sure there is a safe and sound system of issuers to provide funding mortgage lending for FHA, VA and related government programs. Through our securitization platform, lenders access mortgage funds and issue mortgage backed securities, resulting in the best possible terms for consumers. We insure that investors who invest in the MBS can make payments, called pass-through’s, to the investors each month.
The flexibility of our platform allowed new issuers, known as non-depositories, to step into our program when the depositories stepped out, Ginnie Mae has seen tremendous growth. Over the last few years, Ginnie Mae, through its guaranty, has supported affordable mortgages or rents for almost nine million households -- equivalent to everyone living in New York City. Our current MBS outstanding, about $1.7 trillion, is evidence that Ginnie Mae has become an essential, if not primary, source of mortgage funds during the economic recovery as well as the Great Recession.
Since Ginnie Mae exists to support government mortgage programs, we serve the same constituencies as the FHA, VA and other programs: lower- and middle-class households, military veterans, and those living in rural communities. And almost across this spectrum, financial burdens have been rising.
Student debt has been growing to uncomfortable levels for quite some time now. Studies show that seven in 10 college graduates now have student loan debt. And the average debt per graduate increased from $18,600 on average per graduate to $29,000. The resulting growth in monthly debt payments has cut into graduates’ ability to pay for housing.
At the same time, more established workers have not seen their wages increase enough to improve their standard of living. Wages, after plunging during the Great Recession, have only managed to climb just over 2.0 percent, leaving many households in worse economic shape than before, with fewer funds to pay the rent or mortgage.
Further, we have seen record numbers of our veterans taking out VA mortgages in recent years, reflecting the financial needs of veterans and their survivors. Indeed, VA mortgages represent as much as 40 percent of recent Ginnie Mae MBS issuances.
And, there are the senior citizens, now swelling in number due the aging of the Baby Boom generation. Seniors have been pressed by the need to stretch out retirement savings over a longer life span. During the past generation, average life expectancies have increased almost five years, to 79. But personal savings have lagged considerably. Nearly 30 percent of those age 55 and older have no retirement savings or a traditional pension plan; for those with 401(k)s, the median balance for those between 55 and 64 is just $104,000, below the target range for an economically secure retirement.
What do all these households have in common? In recent years, their primary, if not only, means to secure housing have been the government mortgage programs supported by Ginnie Mae. And, expect these constituencies to turn even more to government mortgage programs to secure housing.
Given the critical nature of what we do, it is imperative that Ginnie Mae continue to thrive and flourish. We can only do this if we meet the needs of financially-strapped households and effectively handle the new housing environment in the wake of the exodus of traditional banks.
You will hear more about the changing landscape in banking in future posts.