Ginnie In Brief
|Ginnie Mae addresses servicer liquidity issues|
|by Seth D. Appleton | 3/27/2020|
I wanted to communicate about Ginnie Mae’s efforts to address any servicer liquidity issues that might result from the COVID-19 emergency.
Under the Ginnie Mae MBS program, the approved issuers who service mortgage-backed securities (MBS) are required to remit scheduled principal and interest (P&I) to investors, and make various other payments in connection with mortgage loans, even when monthly payments are not received from borrowers. Indeed, the cornerstone of our MBS Guaranty program has been and will always be that the investors who support access to affordable mortgage credit for the U.S. Department of Housing and Urban Development (HUD), the U.S. Department of Agriculture (USDA), and the U.S. Department of Veterans Affairs (VA) borrowers by purchasing Ginnie Mae securities will receive payments of principal and interest on time and in full.
We have heard from our issuer and servicing partners that borrower forbearance arrangements that are nationwide in scope could place an enormous strain on issuers. This strain would be caused by the immediate need to advance required pass-through payments to investors, or other entities entitled to receive payments, and the later reimbursement of those advances by borrowers or the agencies who insure the loans (HUD, VA and USDA under the Ginnie Mae program).
Please know that we are taking action to address these concerns and potential liquidity challenges faced by Ginnie Mae issuers. Ginnie Mae has the authority to make changes to the requirements of our program, and we are using those powers to tailor the existing disaster pass-through assistance programs to more suitably scale to the needs of this National Emergency.
Ginnie Mae fully anticipates implementing within the next two weeks, via an All Participants Memorandum (APM), a Pass-Through Assistance Program (PTAP) through which issuers with a P&I shortfall may request that Ginnie Mae advance the difference between available funds and the scheduled payment to investors. This PTAP will be effective immediately upon publication of the APM for Single Family program issuers, with corresponding changes made to Ginnie Mae’s MBS Guide in due course. We anticipate publishing PTAP terms for HMBS (reverse mortgage) and Multifamily issuers shortly thereafter.
Under current policy, the advancing of funds by Ginnie Mae to an issuer as a result of a Major Disaster declared by the President of the United States would be a considered an event of default under our program. But, because the current National Emergency is not limited in geographic scope in the way a natural disaster is, a P&I advance by Ginnie Mae through the PTAP will not be considered an event of default, though all other program requirements will continue to apply. In return for any payments advanced under the PTAP, issuers will be required to sign an agreement with Ginnie Mae and must repay the advance within a specified time period. The agreement with Ginnie Mae will provide for extension requests and specify the rate of interest that will apply to the borrowed advances.
To be perfectly clear, borrowing under the PTAP should be a “last resort” financing option to alleviate a liquidity shortage faced by any Ginnie Mae issuers. PTAP’s purpose will be to support the forbearance and loss mitigation programs of our insuring agency partners (FHA, VA and USDA) by minimizing potential disruption in the mortgage servicing market so that those federal mortgage insurance and guarantee programs can be administered efficiently and with maximum help to borrowers. Ginnie Mae will choose to make these advances only where doing so will further the program mission and the American taxpayers who stand behind it.
As noted above, these exigent changes to Ginnie Mae’s disaster pass-through program under the PTAP will allow us to continue to honor our statutory duty to ensure the timely and full payment of P&I to Ginnie investors.
I also want to relay that the implementation of the PTAP is not the only step Ginnie Mae is taking to alleviate the effects of the National Emergency. We have recently acted to facilitate electronic execution and transmission of certain pooling documents (see APM 20-01), and delayed submission requirement for audited financial statements from issuers (see APM 20-02). We are also expediting our digital collateral initiative, and in the near future Ginnie Mae expects to publish information about forbearance of sanctions for violation of liquidity and delinquency standards attributable to the COVID-19 crisis.
Nonetheless, while PTAP and these additional policy actions will not by themselves address the full range of potential stress on issuer cash flows and operations, market participants should be assured that Ginnie Mae is acting expeditiously and forcefully to support relief for American homeowners and meet its statutory responsibility to provide stability and liquidity in the secondary market for residential mortgages.
|The Road Forward for Ginnie Mae|
|by Seth D. Appleton | 2/19/2020|
With the housing finance system experiencing a significant evolution, it’s an exciting time to be a part of Ginnie Mae. The agency is developing new programs, processes and technology to ensure that it remains a reliable source of capital for the government mortgage loan market and the many households who depend on it. We are taking steps to ensure that it is well positioned to take on new responsibilities, if asked, as this period of change continues.
In 2019, Ginnie Mae reported more than $450 billion in MBS issuances, lifting our total outstanding MBS to nearly $2.1 trillion and providing affordable housing finance to approximately 1.8 million households. Those numbers and the impact on homeowners across the country would not have been possible without the commitment of our Issuers, servicers, investors and other stakeholders.
Already in the first month of 2020, strong MBS issuance volume in January is picking up where 2019 left off. For the past five months, Ginnie Mae MBS issuance has exceeded $50 billion — the first time that has ever happened. This is a result of the combination of mortgage rates hovering around historic lows, lenders employing new technology and improved borrower marketing strategies.
We will continue to be vigilant about monitoring market data and Issuer performance and on guard against trends that could have negative implications for the Ginnie Mae MBS program. Loan prepayments, even at rapid levels, are not inherently problematic if they clearly relate to market conditions and reflect the ability of homeowners to improve their financial situation. In order to address lending practices that have unhealthy effects, Ginnie Mae and the Department of Veterans Affairs (VA) have taken several policy actions in recent years; we are currently evaluating the impact of these steps and will consider additional steps if they seem warranted.
Our embrace of new technology, such as Robotic Process Automation and digital mortgages, signals that Ginnie Mae is changing, even as important aspects of our business remain constant. As execution of our “Ginnie Mae 2020” agenda continues throughout the year, we will improve the way users access core applications and deliver single-family pools. Ginnie Mae will also publish new e-mortgage rules related to digital collateral in our MBS Guide this year, as well as initiate an accompanying policy program test. Looking further down the road, we have started to plot the path toward the transition to loan-level program functionality that we committed to in the Housing Finance Reform Plan from the Department of Housing and Urban Development (HUD).
Our attention to risk management remains firm as well, as we continue to refine our program to model the impact of stressed economic environments on the institutions whose performances we guarantee. We are also working on establishing program requirements about resolution planning to better equip us for large-scale institutional failures
Moving into 2020, the industry can be reassured that Ginnie Mae will continue pushing forward in our mission. Not only are we listening to our Issuers, servicers and investors and keeping an eye on managing risk to taxpayers, but we’re holding true to our goal of serving American homeowners and renters by being the most efficient conduit possible for the delivery of global capital.
|Ginnie Mae launches Innovation Lab|
|by Omar Bouaichi | 1/16/2020|
The mortgage finance system is always evolving, with participants continually searching for new, more efficient ways to do business, and make homeownership affordable and rental housing available to more families. As the largest source of capital for low- and moderate-income families and veteran homebuyers, it’s Ginnie Mae’s responsibility to stay abreast of market and business process innovations in order to successfully lead the industry to be more forward-thinking and adaptive. That responsibility is what led Ginnie Mae to launch its Innovation Lab in 2019.
Ginnie Mae’s Innovation Lab was created as a tool to support the evolution of programs, products and services that relate to our participation in the mortgage finance industry. A more robust innovative function will allow Ginnie Mae to systematize innovation across the enterprise, helping to bring more high-impact solutions to life in a more proactive manner.
This is accomplished by providing an isolated facility to intake, experiment and scale new emerging technologies to conduct “Greenfield Projects” and evaluate solutions for further investment, all with the ultimate goal of solving Ginnie Mae’s most pressing and challenging business needs. Examples of innovation opportunities include the use of cloud technology, robotic process automation (RPA), DevSecOps, artificial intelligence and machine learning, and predictive analytics and cognitive search.
It is important to note that innovation labs work varies, as industries and companies are trying to accomplish different goals and operate in different environments. At Ginnie Mae, our lab will focus specifically on bringing cutting-edge industry solutions and fostering a culture of innovation amongst our employees.
Ginnie Mae Innovation Lab matches the work of other companies committed to bringing in technology to make business more efficient. Most observers trace this approach back to Lockheed’s fabled “Skunkworks,” and have heard of this strategy being deployed in private sector companies, with little awareness of it being applied in the public sector. The public sector is very active, however, especially at the federal and GSE level, with USAID, NASA’s Solve Program, AFWERX at the Air Force, and the VA Center for Innovation as a examples of established innovation labs or teams.
Establishing an Innovation Lab is not without challenges, either in the public or private sectors. One of the most difficult aspects is convincing leadership that the lab will be additive to their programs as a service provider to help the organization find modern solutions to challenges. When Ginnie Mae launched its Innovation Lab, senior leadership knew that not every project would end in success. After all, by its very nature, innovation involves a degree of uncertainty and risk, so managing failure is an important element of the lab’s success. Ginnie Mae leadership pressed forward knowing that the most effective innovation programs take on a blend of transformational, homerun swing projects along with a more incremental, quick-win approach. Having a centralized innovation capability will allow Ginnie Mae to “fail” and move on from nonviable ideas more quickly and efficiently, while also making sure it’s capturing and consolidating what it learns from unsuccessful efforts so that it can use these insights moving forward.
Ginnie Mae leadership sees the inherent value of the Innovation Lab and strongly believes that the lab will see greater investment as Ginnie Mae advances its modernization, transformation and next-generation programs.
While leadership support is essential, staff buy-in is critical, too. Ginnie Mae structured the lab in such a way to make sure employees at all levels have the opportunity and resources to help them innovate; part of this will be accomplished through the launch of prize challenges and using the Lab space to test solutions with actual Ginnie employees. Moreover, leadership believes the Innovation Lab will enable the growth and development of talent across the organization.
As we all enter a new decade, Ginnie Mae is entering an exciting phase of its technology modernization with the Innovation Lab project. We have strong and reasonable expectations for the effort and are confident that the investment of staff and money will grow our mission of making the most efficient secondary mortgage market possible on behalf of government mortgage borrowers and American taxpayers.
|Ginnie Mae’s impact on U.S. housing finance? $2 trillion and counting|
|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.
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.
|Global Capital Via Ginnie Mae Facilitates Affordable Homeownership |
|by Michael R. Bright | 8/29/2018|
The U.S. mortgage market today largely relies on the secondary market to provide the capital necessary to help make affordable homeownership possible. I’m proud to say that Ginnie Mae’s role in the delivery of capital for homeownership has never been greater. As the organization approaches $2 trillion in outstanding mortgage-backed securities (MBS), we’re focused on meeting the needs of our current investors and tapping into new markets in the U.S. and around the world to help maintain the flow of low-cost capital. The capital markets are extremely dynamic. Ginnie Mae has committed to matching that dynamism on behalf of the hundreds of thousands of homeowners we help every year.
Foreign investors held 14.4 percent of agency MBS in Q1 2018, up sharply from the lows in 2013. For the month of March 2018, this represents $920.7 billion in Agency MBS; $405.2 billion held by foreign official institutions and $515.5 billion held by foreign private investors.