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As 2019 Takes Shape

2019 is shaping up to be a year of execution for Ginnie Mae. Now that the start of the year is behind us, mid-February provides just enough perspective to think about the past year as a whole, and enough data to anticipate how the current year will unfold.

2018 was a historic year for Ginnie Mae, as we passed the $2 trillion mark in outstanding mortgage-backed securities (MBS). We continued to improve our capabilities and refine our mission orientation. With the publication of “Ginnie Mae at 50,” we celebrated an important birthday and provided an update on our evolution in service to low-income, first-time homebuyers, veterans and rural homeowners. Our “Ginnie 2020” white paper showcased a multi-year strategic roadmap which will enable us to evolve our counterparty risk management and modernize the platform as we continue expanding our capacity to fulfill our mission.

2019 is off to a strong start, with the positive impact of our MBS program on borrowers we serve and investors undiminished by the partial shutdown of governmental functions that straddled the new year. We are resolved to make this a year of enhanced communication and increased transparency with our Issuers and market participants. The rescheduled Ginnie Mae Summit, to be held on June 13th and 14th, will be an excellent forum for discussion and interaction with Ginnie Mae stakeholders.

Ginnie Mae is doing all that it can to support the borrowers that benefit from our program. We know that the best way possible to accomplish this is to ensure the Ginnie Mae security performs well and meets the expectations of global investors whose investment capital provides the funds that flow to our Issuers and their borrowers.

An area of continued focus is VA churning and outlier prepayment speeds in the Ginnie Mae security. Although our efforts to date have helped address the issue, prepayment speeds on certain product types are still not in line with market dynamics, particularly in a flat to rising rate environment. Ginnie Mae remains committed to addressing this issue in the security and will continue to evolve our polices to ensure that the cash flows of the Ginnie Mae security are strongly correlated with economic factors. We strongly believe that is not warranted for the actions of a few to an outsized adverse impact on all borrowers in the program.

Another way to ensure Ginnie Mae facilitates a strong market for its MBS is through a robust counterparty risk management framework.

Ginnie Mae is the midst of evolving our risk management methodology, and our goal is to work closely in this with the non-bank lender/servicers whose market share has risen so much in recent years. We view the non-banks as a vital component of the housing finance ecosystem, filling an important role in the market by extending credit (particularly to those borrowers who rely on federal mortgage programs), helping the industry to evolve technologically, and improving customer care for troubled borrowers. We also intend to take steps that help ensure that Ginnie Mae mortgage servicing rights (MSRs) generate an appropriate level of cash flow and are supported by an adequate level of market liquidity.

Given our responsibility to mitigate risk, in 2019, Ginnie Mae will continue to be focused on ensuring that there is enough capital and liquidity in the system to withstand various economic cycles and that our policies and procedures are sufficient in the event of any market disruption. These steps not only protect the agency, and ultimately American taxpayers, but should also ensure more stable and affordable access to mortgage financing.

With 2019 now firmly underway, we look forward to a robust dialogue with market participants and stakeholders so that together we may better serve the low-income, first-time homebuyers, veterans and rural homeowners that depend on Ginnie Mae.

“Ginnie In Brief” was launched last year, as a means of offering insight into how Ginnie Mae views market developments. Watch this space, as we continue to provide updates on our perspective in the months ahead.