Skip Ribbon Commands Skip to main content
gmlogo searchimage
bannerimage
Ginnie In Brief
 
Search
Share
* To
* From
Message
URL
https://www.ginniemae.gov/newsroom/GinnieInBrief/Pages/default.aspx
Print Friendly

Ginnie In Brief

Sort by: Newest | Oldest
Ensuring program success with continued growth
by Maren Kasper | 11/1/2018
Ginnie Mae has officially passed the $2 trillion mark in outstanding mortgage-backed securities, thanks to a strong business model and support from both domestic and global investors. It remains vital that our investors continue to return, so we can secure the global capital that makes homeownership possible for so many Americans. Simultaneously, we must work closely with the Issuers, lenders and servicers in our program to ensure they’re committed to the business. In the video above, Ginnie Mae Executive Vice President Maren Kasper discusses why the success of the program depends on the commitment of all participants, as Ginnie Mae’s portfolio continues to grow.
GM_2trillion__thumb
by Michael R. Bright | 10/18/2018

Last month Ginnie Mae reached an incredible milestone that, for me, cements our place as a leader in the mortgage-backed securities (MBS) market: Our total outstanding principal balance crossed the $2 trillion line.

That number matters because millions of low- and moderate-income rural, urban and veteran homeowners rely on loans made possible by Ginnie Mae’s MBS. The Ginnie Mae guaranty allows mortgage lenders to obtain a better price for their mortgage loans in the secondary mortgage market, thus driving down the cost of homeownership. The lenders can then use the proceeds to make new mortgage loans available, thus increasing liquidity.

The fact that Ginnie Mae has reached $2 trillion in outstanding principal underscores the corporation’s increasingly important role as a pillar of the secondary mortgage market. The corporation has grown a lot in the past decade or so. In 2010, Ginnie Mae’s outstanding principal balance was just $1 trillion. In other words, in just eight years we’ve grown as much as we did in our first 42 years. We meaningfully expanded our service at a moment when consumers needed it most.

GROWTH OF GINNIE’S OUTSTANDING PRINCIPAL BALANCE OVER THE YEARS

Ginnie Mae’s market share of MBS has also skyrocketed, from a low of 4 percent in 2005 to a peak of 31 percent in recent years.

Ginnie Mae has been able to grow and increase our impact because our business model works. We facilitate the securitization of mortgages insured or guaranteed by the Federal Housing Administration, the Department of Housing and Urban Development’s Office of Public and Indian Housing, the Department of Veterans Affairs, and the Department of Agriculture’s Rural Development Programs. With an explicit, transparent and paid-for government guaranty, Ginnie Mae’s bond and Ginnie Mae’s brand are recognized as the most secure mortgage security in the world.

Ginnie Mae’s business model significantly limits risks to taxpayers by providing a safe, effective and government-backed channel for the flow of capital for U.S. mortgages. How reliable is our robust process for ensuring the timely payment of principal and interest to security holders? Ginnie Mae has never missed a payment since its founding in 1968, even during the financial crisis of 2007-2008 and ensuing recession. We return money to the U.S. Treasury every year.

A strong secondary mortgage market strengthens homeownership. We’re proud to say we’ve supported American homeownership for 50 years, and we’re not slowing down.

GM_brief_CounterpartyRisk2_Thumb
by Gregory A. Keith | 10/12/2018

For over 50 years, Ginnie Mae has created tremendous value in the housing markets of the United States. Because Ginnie Mae provides access to the global capital markets, borrowers —especially people who are low-income, first-time homebuyers, people who live in rural areas and veterans — can reliably obtain affordable mortgage credit. Renters can obtain safe, clean and more affordable housing because global capital flows to multifamily developments securitized through Ginnie Mae. And many seniors take advantage of reverse mortgages to be able to afford aging in place or live in assisted-living and skilled-nursing facilities funded by Ginnie Mae’s mortgage-backed securities.

As Ginnie Mae has grown to $2 trillion in outstanding securities, our Issuers and servicers who make and manage these loans have been able to grow, too, as has the value in their firms. And investors in Ginnie Mae’s securities, who put up the capital that makes our program work, have enjoyed investment options free from credit risk at yields superior to U.S. Treasury issues.

The Issuers who package our MBS are key to the Ginnie Mae model’s ability to protect the U.S. taxpayer from risk. The roles and responsibilities of a Ginnie Mae Issuer are substantial and require constant focus. Our Issuers bear primary responsibility for the timely and complete monthly cash flows of our MBS. They must have the financial resources to deliver, without fail, MBS investors’ principal and interest payments on the 20th of each month.

As stewards of the Ginnie Mae guaranty, we regularly assess whether our Issuers can fulfill their obligations. Today, because the stakes are high for all involved, and because the Ginnie II market has grown so large, Ginnie Mae is evolving its view of what a successful participant in the program looks like.

Many of these ideas have been outlined in “Ginnie Mae 2020,” our roadmap for sustaining low-cost homeownership, and Issuers have already seen some changes to our MBS Guide. APM 18-02, published in January, provides examples of situations outside the acceptable risk parameters that put Issuers in violation of our program requirements. If an Issuer violates these program requirements, we will impose greater restrictions on that Issuer’s participation in the MBS program. These steps may include, but are not limited to, requiring that an Issuer recalibrate its high-risk portfolio to fall within the acceptable risk parameters; requiring that the Issuer diversify its portfolio; or placing a restriction on the Issuer’s participation in the PIIT program and/or multiple Issuer pools.

Issuers should also understand that additional commitment authority is not a sure thing, even for approved Issuers in our program. Commitment authority — the right of an Issuer to issue more Ginnie MBS — comes in discrete increments so we can manage the growth of our program in a responsible way. When we tell an Issuer it has not met our requirements or has been found to be operating in a risky way, it needs to remedy the deficiencies quickly before we extend it the right to do additional business with us.

In the coming months, we will expand on these concepts and publish guidance making it clear that while an Issuer may be in compliance with the MBS Guide, its financial condition and performance may be viewed as being riskier than is wise. A high-risk profile hinders Issuers’ ability to provide the Ginnie Mae guaranty. In addition, we believe that as an Issuer’s participation in our program grows, its level of operational sophistication, governance and financial metrics need to continue to evolve as well.

With this in mind, we will soon require our largest Issuers to secure servicer ratings and, in some cases, credit ratings from a statistical rating agency.

This winter, we will roll out Ginnie Mae’s version of a stress test. It will evaluate our Issuer’s ability to comply with Ginnie Mae and GSE requirements and warehouse lenders’ covenants, and to remain liquid and solvent in any economic environment.

Some of our recent changes are not just about the micro safety and soundness of our counterparties. Issuers share in the overall stewardship of our program. That is why, in APM 18-02, Ginnie Mae included new rulemaking on how an Issuer’s portfolio prepayment experience may affect its participation in the program. We are responding to growing concerns emanating from the investor community that selected Issuers’ MBS paid off at a rate in excess of modeled expectations, in large part due to Issuer business practices. Investors began to shun Ginnie Mae MBS, and American borrowers paid the price as mortgage rates ticked upward. Ginnie Mae did not and will not stand by and let the actions of a few participants harm borrowers and damage the relative value of the security for the remaining Issuers. All Issuers must protect the liquidity and value of the Ginnie Mae security and not benefit themselves above the greater good of the program.

Being a Ginnie Mae Issuer is a privilege that should not be taken lightly. We expect a lot from our Issuers and will expect more from them as non-banks continue to grow as a proportion of our Issuer base and as we plan for the consequences of a potential economic downturn. As the Chief Risk Officer for Ginnie Mae, I will work with my department to ensure the success of these initiatives in the coming years. Ginnie Mae and its Issuers are in it together to protect American homebuyers, renters, MBS investors and, ultimately, the American taxpayer.

GM_GinnieGrowth_thumb2
by Ginnie Mae | 10/5/2018

Millions of low- and moderate-income, rural, urban and veteran homeowners rely on loans made possible by Ginnie Mae’s mortgage-backed securities (MBS). Our robust and reliable process for ensuring the timely payment of principal and interest to security holders has enabled us to never miss a payment since our founding in 1968. And over the past 10 years, that business model has been one reason for the tremendous growth we’ve experienced.

The charts below illustrate how momentous the past decade has been for Ginnie Mae.

gm_ginniegrowth.jpg

Harvey_Hall_Thumbnail
by Ginnie Mae | 9/13/2018

All segments of the U.S. housing market are going strong, including the multifamily sector where construction of new apartments hovers near a recent peak. However, many of the new apartments being built are too expensive for low- and moderate-income renters. That’s why it’s important for Ginnie Mae’s multifamily MBS program to continue its role as a source of mortgage capital for developers and owners. These groups are building new and refinancing existing apartments that are home to low- and moderate-income families.

While primarily known for financing homeownership, Ginnie Mae’s MBS programs also support mortgage lending for qualifying apartment buildings. For example, in August, $1.53 billion of Ginnie Mae MBS were issued to finance multifamily housing and more than $16.5 billion were issued for the fiscal year through August 31.

Ginnie Mae’s MBS guarantee works in tandem with mortgage insurance from the Federal Housing Administration to attract lenders and investors to the multifamily mortgage market. By working together, FHA and Ginnie Mae help lower the cost of mortgage loans to construct new or rehabilitate existing rental housing affordable for low- and moderate-income consumers. Those lower-cost mortgage loans lead to reduced construction and rehab costs and, ultimately, more affordable rents for families.

The need for affordable rental housing is great. According to data from the Joint Center for Housing Studies at Harvard University, nearly half of renters in the U.S are cost-burdened, meaning that their rent payments exceed 30 percent of their gross income.

For decades, Ginnie Mae has helped to finance affordable rental housing, and the cumulative extent of its efforts is significant. Since issuing its first multifamily MBS in 1971, Ginnie Mae has guaranteed more than $290 billion of multifamily MBS.

Because of participation in the Ginnie Mae multifamily MBS program from more than 60 large and small lenders across the U.S., families are able to afford quality rental housing.

View All
Last Modified: 6/22/2018 7:24 PM