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A Helpful Conversation on Counterparty Risk
by Maren Kasper | 3/8/2019

In late February, the Mortgage Bankers Association published a white paper entitled “The Rising Role of the Independent Mortgage Bank – Benefits and Policy Implications.” It’s a helpful addition to the ongoing dialogue around counterparty risk in the housing finance system.

At Ginnie Mae, we dedicate significant energy and focus to evolving our approach to counterparty risk management in order to safeguard the government guaranty we provide and to protect investors. The American system of housing finance is a complex ecosystem involving primary lenders, the secondary market, insurers, banks and non-banks and government agencies. It’s important to keep a robust conversation going about the evolution of our industry and the way systemic risk is affected by policy changes and industry evolution.

Particularly because it focuses on one of the most notable trends in the housing finance system – the increasing share of originations stemming from so-called non-banks – the MBA’s white paper is a helpful addition to the discussion.

Last year, we published “Ginnie Mae 2020,” which included an extensive section on our thinking about enhancing counterparty risk management. This wasn’t the first time we addressed the importance of liquidity in the post-financial crisis era, which is an especially important topic given how our service to the market has increased over time. In 2014, we also published our white paper, “An Era of Transformation.”

As the Brookings Institution points out in its February 2018 paper, “Liquidity Crises in the Mortgage Market,” the U.S. housing finance system’s vulnerability to a liquidity crisis is underappreciated. Industry participants such as the MBA weighing in on the topic of counterparty risk is important to educating key audiences and stimulating dialogue. We do not necessarily need to endorse every suggestion or even such a paper’s broader conclusions to welcome the MBA’s serious contribution to the conversation.

The MBA’s paper leans into the concept of “counterparty oversight” by Ginnie Mae and others. We welcome that important role, and view it as our responsibility to foster greater dialogue about the range of issues attendant to counterparty risk. This is one reason among many that we so look forward to the Ginnie Mae Summit, which will take place on June 13th and 14th.

Understanding how the housing finance system’s risk profile is affected by the increase in mortgage originations by non-banks is just one development, among many, that we are keeping a close eye on. That organizations such as the MBA are willing to join this conversation is an important, and welcome, development.

Ginnie in Brief Contributors
Michael R. Bright
Ginnie Mae
Michael Drayne
Gregory A. Keith
Maren Kasper
Tamara Togans
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Last Modified: 5/24/2018 10:44 AM