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Stakeholder Letters

Increasing Issuer Effectiveness, Strengthening Our Model
Published Date: 1/29/2015 1:00 AM

The landscape in the housing finance market is changing rapidly, forcing those of us in the industry to quickly adjust to continue to ensure we are effectively managing our risk.

One of the most dramatic ways the market has changed is the evolving makeup of Issuers in the marketplace. Since 2008, the percentage of Ginnie Mae Issuers that are non-depositories, or non-banks, has risen from 18% to 50% percent.

At Ginnie Mae, we’ve focused heavily on the interests of our more than 400 Issuers by working to provide them a roadmap for success in their relationship with us. To facilitate this, we will launch our Issuer Operational Performance Profile (IOPP) tool early this year.

The IOPP will give Issuers a way to gauge their effectiveness against our Issuer performance expectations and will provide a way for them to measure their operational and default performance against their peers.

We believe this new tool will help us continue to ensure that a safe, effective, and government-backed channel for the flow of capital for U.S. mortgages exists, reducing risk to the taxpayer and providing much-needed capital for the government.

Similar to a scorecard, the IOPP will provide Issuers a performance report on a series of pre-determined metrics. This will help us ensure our Issuers are performing well, and if they aren’t, it will help them identify areas for improvement.

Through this tool we will achieve improved Issuer management capability which will allow Issuers to better manage their own performance, ultimately helping to improve Ginnie Mae’s performance. In addition, the IOPP will help drive internal consistency in monitoring the business activities across the broader population of Ginnie Mae Issuers and enable us to provide constructive feedback to our Issuers.

To develop this tool, we worked closely with our Issuers for help defining and validating the metrics that would make the IOPP most useful to Ginnie Mae and most helpful to our Issuers. We recognize the importance of being a good partner.

By involving the Issuers in the development of the IOPP, they had a stake in the process and worked with us to ensure we were focused on identifying metrics which Issuers could influence so they could own their performance and outcomes within the IOPP.

While we did rely on Issuers to help us in determining the metrics to be used in the IOPP, we made the final determinations on the weighting of each metric within the IOPP based on its significance and importance to Ginnie Mae.

Within the IOPP each Issuer will be rated against a predefined peer group, based on portfolio unpaid principal balance (UPB). The end result will be two scores for each Issuer – one for operational management and one for delinquency management – both of which will be calculated and reported each month.

The operational management score will be based on key metrics such as failure to report unpaid principal balance, timely reporting of UPB corrections, and a compliance review metric based on findings from Ginnie Mae’s most recently-completed compliance review of the Issuers. The metrics behind the delinquency management score will be based on early payment defaults, 60-90+ day roll rates, workout effectiveness, and percentage of loans in foreclosure.

We believe that once launched, the IOPP will help us in our work with our Issuers so we can continue to provide stability to the housing finance industry and continue to meet our mission of bringing global capital into the housing finance market to provide affordable housing opportunities to millions of Americans.