Since the first Ginnie Mae mortgage-backed security (MBS) was issued more than 50 years ago, Ginnie Mae has maintained a laser-like focus on guaranteeing securities that attract a diverse group of fixed-income investors. The breadth and depth of this investor pool helps keep liquidity flowing to the U.S. government-backed mortgage market. With more than $2.1 trillion of MBS outstanding and investors from five continents holding our securities, the market for Ginnie Mae MBS clearly is deep and liquid. Nevertheless, the agency chose not to rest on its past success and decided to press ahead with program enhancements that could attract more investors and help Ginnie Mae better finance affordable housing for America’s families.
Earlier this month, Ginnie Mae announced that it is implementing a new Environmental, Social, and Governance (ESG) data point in the Single-Family Supplemental File investors use to analyze the agency’s securities. The objective is to give Ginnie Mae MBS investors information that supports their sustainable investing decisions and solutions.
The ESG record will provide pool level aggregate information about the extent of loans and unpaid principal balance (UPB) dollars that are in low- and moderate-income areas.
ESG is growing in importance as a lens through which investors in America and around the world measure investment suitability. By enhancing visibility into the Ginnie Mae pools that contain mortgage loans on homes located in low- and moderate-income areas, Ginnie Mae gives investors another way to gauge the agency’s focus on an aspect of its mission.
The low- and moderate-income areas used in formulating this new disclosure are defined by the Department of Housing and Urban Development (HUD). The new disclosure aggregates to the pool level the number of loans, percent of loans, UPB dollars, and percent UPB dollars across low- and moderate-income areas applicable to the pool.
The new dataset compliments the existing information Ginnie Mae currently provides on the number of first-time homebuyers who are financed with Ginnie Mae MBS. A test file of the enhanced disclosure will be provided in mid-April 2021 and the first production MBS SF PORTFOLIO – POOL SUPPLEMENTAL file containing Record Type 25 will be provided on the Disclosure Data Download page on May 10th.
Ginnie Mae’s role in the fixed-income markets is stronger than it has ever been, with record-breaking MBS issuance in several of the past few months. Our outstanding mortgage-backed securities (MBS) have grown steadily, in parallel with the demand for affordable home financing as 30-year fixed-rate mortgage costs fell to levels never before seen. The Ginnie Mae MBS program is here for mortgage borrowers and investors through all market conditions, whether led by purchase mortgage activity or refinance mortgage volume. Consider the numbers: Over the past decade, the value of Ginnie Mae’s outstanding MBS doubled from $1.05 trillion at the end of fiscal year 2010 to $2.12 trillion at the end of fiscal year 2020.
The volume increase in outstanding MBS reflects an expansion of the portion guaranteed by the Department of Veterans Affairs (VA). The share of VA mortgages in new Ginnie Mae MBS has increased sharply over the past ten years, from 23 percent in 2011, to nearly 44% in 2020.
Ginnie Mae is committed to maintaining a strong MBS program built on a foundation of flexibility and reliability in order to meet the secondary market needs of the Issuers responsible for loans to veterans under the VA program, while also minimizing risks to taxpayers.
Since it was founded, Ginnie Mae has strived to be a model for effective governmental involvement in a sizable, complex, market-oriented segment of the economy. The events of 2020 presented us with new and unique challenges in executing on this goal as the country confronted a pandemic that still disrupts nearly every aspect of life.
Our strategic response to the COVID-19 pandemic, and government policy response, was intended to support the relief efforts while preserving market confidence in the security and honoring the overarching imperative that MBS investors be assured of timely and full payment. To do so, we implemented a number of changes to our internal and external-facing initiatives. The internal changes aimed to increase the efficiency and effectiveness of our business processes, even if only temporarily, as a means to free up the resources needed to deploy a suite of pandemic-related programs.
The suite of external-facing initiatives included MBS Program updates designed to meet the needs of the moment while balancing the interests of stakeholders, and included updates that:
1 enable greater use of digital assets and electronic transactions to minimize business disruptions associated with public health guidelines (i.e., APM 20-01 Temporary Use of Digital Signatures on form HUD 11711A and form HUD 11711B, APM 20-04 Servicemembers Civil Relief Act (SCRA) Process Improvements, APM 20-10 Digital Collateral Program Launch, APM 20-11 MyGinnieMae Guide Updates);
2 safeguard liquidity as well as the safety and soundness of the government-backed mortgage secondary market segment (i.e., APM 20-03, APM 20-05, APM 20-07, APM 20-16, and APM 20-19);
3 provide MBS Program participants with temporary or limited flexibilities as to reduce compliance and regulatory burdens (i.e., APM 20-02, APM 20-06, APM 20-14 Alternative Procedures Permitted for Certain Aspects of Issuer Annual Audit Report for Fiscal Year 2020; APM 20-17, APM 20-18); and
4 support and foster alignment in federal and industry-wide initiatives (i.e., APM 20-12, APM 20-13).
We recognize that the task of navigating through the COVID-19 pandemic is not yet complete, but the new year provides an opportunity to begin shifting our focus to what must occur next. The MBS Program initiatives implemented this year are different both in degree and in kind from those that were implemented in the past, and as a whole could not be sustained in perpetuity in their present form without detriment to the overall program. As a result, Ginnie Mae expects to amend or retire many of the temporary programs put in place in 2020, and renew its focus on our previously published strategic agenda.
Two principles will guide Ginnie Mae in this process. The first is that programs put in place to combat the effects of the pandemic and the government response to it were never designed to be permanent. Of course, Ginnie Mae will continue to support initiatives deployed in 2020 which were always going to be implemented but were altered or accelerated due to the pandemic, such as those associated with digitalization efforts. But a number of initiatives will necessarily sunset. This includes, for example, the extraordinary relief programs necessitated by the increases in borrower forbearance volumes such as the Pass-Through Assistance Programs and the Temporary Relief from the Acceptable Delinquency Threshold Requirements, which are set to expire and will not be necessary once affected borrowers find a permanent loan resolution option. The second is that changing economic conditions may require Ginnie Mae to continue, alter, or expand some of these temporary programs – though it should be understood that Ginnie Mae does not anticipate doing so absent elevated delinquencies or other adverse economic developments.
Part of the task ahead is clearly articulating to program participants which initiatives will be retained, which will be amended, and which will be allowed to expire. For this effort, we intend to collaborate with all stakeholders and leverage the lessons and leading practices acquired during the recent trials. We look forward to the new year and the collective work we’ll be undertaking with our governmental and commercial partners.
For the fourth time in five years, Ginnie Mae and its insuring and guaranteeing partners have financed homeownership for more than 900,000 first-time homebuyers. Fiscal year 2020 was the second highest total in five years at 965,115, coming just short of the 2017 high-point of 975,340 and significantly higher than the 888,437 initial buyers in 2019.
Ginnie Mae attracts capital for mortgage lending facilitated by four government programs: the Federal Housing Administration (FHA); the Veterans Administration (VA), the Rural Housing Service within the U.S. Department of Agriculture (USDA) and lending under the Public Indian Housing (PIH) program within the Department of Housing and Urban Development.
Measured by total loans within Ginnie Mae MBS, FHA was the most frequently used program by first-time buyers in FY 2020 with more than 636,000 mortgages. That is followed by the VA program at 228,148, USDA at 99,220 and PIH at 1,531.
However, as a percentage of each underlying agency’s program, 72 percent of all USDA loans went to first-time homeowners, followed by USDA and PIH each at 44 percent and VA at 19 percent.