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Ginnie In Brief

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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.

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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.

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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.

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.

MBS Ownership

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.

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Enhancing counterparty risk management strengthens the government mortgage loan market
by Michael R. Bright | 8/16/2018

Ensuring that investors who own Ginnie Mae mortgage-backed securities will get paid their principal and interest on time is a top priority for us. 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 our investors.

In the following video interview, Ginnie Mae EVPs Michael Bright and Maren Kasper discuss:

  • Why risk management matters,
  • Ginnie Mae’s risk management tools such as CorporateWatch and the Issuer Operational Performance Scorecard (IOPP), and
  • The need for all market participants to have “skin in the game” when it comes to better managing counterparty risk for all participants.

To further your understanding of how Ginnie Mae is enhancing its counterparty risk management, read Pillar II of the Ginnie Mae 2020 report.

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