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Stakeholder Letters

Ginnie Mae Tells Its Story Abroad
Published Date: 11/20/2013

​The mortgage finance landscape is evolving. Policy discussions have gained momentum and an increasing number of industry leaders are speaking out on reform.  While the debate continues, Ginnie Mae remains steadfast in building for whatever the future holds.

We seek to ensure that our mortgage-backed securities (MBS) programs function efficiently in all market conditions and in all production volume scenarios. That’s why we remain committed to modernizing our technology, infrastructure and programs. While we make progress on our modernization efforts in-house, we are also meeting with our broad investor base to answer questions, listen to concerns and incorporate feedback. Doing so is essential to attracting global capital. 

In September, I traveled to Japan and China with John Getchis, Ginnie Mae’s Senior Vice President, Office of Capital Markets, to meet with many of our global investors. Investors in Japan and China own more than 25 percent of outstanding Ginnie Mae MBS. Those we met with expressed that they are keenly focused on preserving and maintaining liquidity in the market. They also want to see the explicit government guarantee on U.S. MBS remain intact.

The international investor community has been closely monitoring U.S. housing reform as well as the Federal Reserve’s monetary policy. While in Japan and China, most of our conversations focused on reform and its implications to Ginnie Mae. Questions ranged from timing on the anticipated GSE reform and the role the federal government may have in a future model, to the timing on the tapering of the Federal Reserve’s MBS purchases.

Also examined at length were the ongoing efforts currently underway to modernize the Ginnie Mae I and II MBS programs. Since 2010, Ginnie Mae II issuance has been increasingly outpacing the issuance of Ginnie Mae Is. In fact, Ginnie Mae IIs now represent 70 percent of our outstanding portfolio. Response from the global community about our proposed changes has been generally very positive. Conceptually, all were encouraged by these modernization efforts, provided liquidity is preserved.  Not surprisingly, they voiced concerns about the logistics of how we get there, and in particular, what will become of the legacy Ginnie Mae I security.

Based on the feedback we’ve received from investors and other key stakeholders, we will spend the next few months building a detailed programmatic modernization strategy and execution plan. Essential to that plan is working with SIFMA on refreshing the TBA eligibility of our securities. We need answers to key questions: Will certain custom pools be TBA-eligible? Will there be pool limits for re-performers? We will also need to determine how best to manage existing Ginnie Mae Is. Will there be a sunset period for legacy Ginnie Mae Is? Will there be a conversion option?
Working through these and other important issues will help us build a comprehensive roadmap toward implementation. We are in the process of establishing a strong, diverse working group that will guide us in these efforts.  Representing all interests involved, members of this group will help to lead us through these challenging issues to find a beneficial solution for all.

Preserving the health and stability of Ginnie Mae and its programs is essential. As we move forward with the modernization of our MBS programs, we are committed to a seamless transition. And, we will be open and transparent in our communications every step of the way. As always, we welcome any and all of your questions and suggestions throughout this important process.