Since its inception in August 1968, the Government National Mortgage Association, “Ginnie Mae” has facilitated social capital investments in affordable housing to advance the needs of America’s underserved communities. As we near the end of our anniversary month, I reflect upon how one of the original United States social enterprises started, where we are today, and what’s ahead.
Ginnie Mae’s History
The genesis of Ginnie Mae can be traced back to the Great Depression, the 1929 stock market crash, high unemployment rates and unprecedented loan defaults - including home loans. When the surge in home foreclosures further depressed home values and the nation’s overall economy, Congress moved to enact the National Housing Act of 1934. The National Housing Act created the Federal Housing Administration (FHA), whose primary goal was to resuscitate the U.S. housing market and introduce mortgage insurance backed by the federal government. In 1938, the Federal National Mortgage Association (Fannie Mae) was created to buy FHA-insured loans from lenders, providing liquidity to support higher risk loans to borrowers who needed credit the most. While helpful, the legislation that created both the FHA and Fannie Mae had limited success in establishing homeownership opportunities for all citizens.
During the civil rights movement in 1968, and after the assassination of Martin Luther King, Congress passed the Civil Rights Act, which contained, among others, two historic pieces of legislation that supported homeownership and prohibited housing discrimination and intimidation. The Fair Housing Act was passed at this time and has been the most consequential housing anti-discrimination legislation in our nation’s history. The Housing and Urban Development Act was signed into law on August 1, 1968, splitting Fannie Mae off into a private corporation, while simultaneously creating Ginnie Mae, a government-owned corporation housed within the Department of Housing and Urban Development (HUD).
What distinguished the new agency, Ginnie Mae, from the corporate entity, Fannie Mae, was the explicit backing by the U.S. Treasury of housing loans insured or guaranteed by FHA. This simple act, of applying the federal government’s full faith and credit guaranty on all mortgage-backed securities (MBS) issued through Ginnie Mae, is historic and brilliant. The Ginnie Mae guaranty provides liquidity for government insured mortgage loan programs while broadening the market for mortgage-backed investments beyond portfolio ownership. Securitization for sale to investors in the secondary market was born.
Ginnie Mae’s mission has always been to promote access to mortgage credit throughout the Nation, including urban, rural, and underserved areas, by increasing the liquidity of mortgage investments. Equipped with this mission and its guaranty, Ginnie Mae went to work.
Ginnie Mae is proud to have issued the first mortgage-backed security in 1970 and initiated a secondary mortgage market. Fifty-four years later, Ginnie Mae continues its critical social mission by driving capital towards underserved demographics and geographies and making sure access to housing is equitable and sustainable.
Ginnie Mae Today
To date, more than 22 million U.S. households have benefitted from Ginnie Mae’s programs as the engine for loans to low- to moderate-income households and first-time homebuyers
This $2.2 trillion securitization program is only possible because of our federal agency partners: FHA, the Department of Veterans Affairs (VA), U.S. Department of Agriculture Rural Housing Services (USDA) and HUD’s Office of Public and Indian Housing (PIH). These agencies and more than 350 approved issuers have facilitated financing for 1.2 million first-time homebuyers, 1.6 million veterans, and over half a million households of color. In fact, Ginnie Mae supports more households of color than Fannie Mae and Freddie Mac, combined.
Since 1970, Ginnie Mae has guaranteed more than $9.7 trillion in MBS, overall. Today, Ginnie Mae guarantees over $2.2 trillion in outstanding mortgage debt, serving 11 million households who hold FHA, VA, USDA and PIH mortgages.
This is a remarkable achievement, underscoring Ginnie Mae’s “countercyclical” role in the American housing market. When economic and market conditions threaten homeownership opportunities in the conventional markets, Ginnie Mae remains steadfast in its commitment to ensure that opportunities exist for affordable homeownership and rental housing for all, and especially for our nation’s historically underserved communities.
While Ginnie Mae is known, primarily, for its support of affordable homeownership through partnerships with FHA, VA, USDA and PIH, Ginnie Mae plays a critical role in both multifamily housing and reverse mortgage markets. To date, more than 14,000 multifamily buildings have utilized the Ginnie Mae securitization program, providing millions of families with affordable rental housing. Ginnie Mae also supports FHA’s move into health care and senior care homes through the multifamily programs. Ginnie Mae is proud to partner with FHA to ensure that our aging population has affordable health care options, as well as nursing home care, if needed. Finally, and for those seniors who choose to age gracefully in place, Ginnie Mae guarantees the FHA Home Equity Conversion Mortgage (HECM) program, where senior households can trade the equity in their homes for cash payments to assist with daily living expenses. To date, Ginnie Mae’s reverse mortgage (HMBS) program has facilitated the securitization of more than 300,000 HECM loans.
The government-backed mortgage loans securitized on the Ginnie Mae platform support first-time homebuyers, veterans, low- and moderate-income (LMI) borrowers, and households in underserved communities. Ginnie Mae MBS are inherently social, making affordable homeownership and rental dwellings possible for communities that have largely been underrepresented in housing finance. Ginnie Mae has always stepped in to fill a substantial void in the housing finance ecosystem, working to bridge homeownership and wealth gaps that persist today.
The verdict is in - by bringing global investors into the U.S. housing finance system, Ginnie Mae continues to lower housing costs for millions of American families across generations.
Ginnie Mae’s Future
Even with all our remarkable achievements, we at Ginnie Mae understand that, to expand equitable access to affordable housing nationwide, there is still much to do. Ginnie Mae cannot do this work alone.
With strong support from the Biden-Harris Administration and HUD Secretary Marcia L. Fudge, Ginnie Mae is investing in transformational technology to ensure that our MBS ecosystem is an efficient and effective securities utility for years to come. Loan originators, lenders, and issuers have a choice when securitizing conventional mortgages in today’s market. Yet only Ginnie Mae provides an explicit government guaranty on mortgage loan collateral insured by our federal agency partners. Our platform and our guaranty must continue to incorporate state of the art technologies, bringing resilience to mortgage lending, lowering costs for families, and improving access to homeownership for borrowers who are not well served by the traditional mortgage lending approach.
Our flagship digital collateral program, which allows for the securitizations of electronic mortgages on the blockchain, is currently accepting applications for new electronic or “emortgage” issuers. Ginnie Mae is pleased to provide digital mortgage opportunities not only to underserved communities that lack ready access to brick-and-mortar lenders, but also to our servicemembers on bases at home and abroad.
Ginnie Mae’s operating platform is currently migrating to the cloud. This move will spur agile development paths in the years ahead and consistent enhancements, reducing transaction costs for our industry partners. Ginnie Mae was recently named to Foundry’s CIO 100 Awards List for 2022 in recognition of our business innovation and technology transformation currently underway to consolidate IT operations in a single and secure government cloud. This award-winning endeavor will give us greater agility and flexibility to build more nimble products and deliver programs such as loan level servicing options to our issuer community.
Overall, improved technology services enable Ginnie Mae to provide better information and market disclosures to our stakeholders, including our investors. We are also expanding our commitment to enhanced environmental, social and governance - ESG - disclosures. Thanks to FHA’s Multifamily Green and Energy Efficient Housing Programs, Ginnie Mae now offers environmentally friendly or “green” disclosures within our multifamily MBS program.
Working closely with our agency partners to maximize data with technological advances, we are also enhancing our disclosure of household income within our MBS pools. This enhanced data disclosure will not only highlight our support of underserved communities, but also incentivize investors’ demand as they look for social impact investing opportunities.
Finally, as the engine of growth within the federal housing finance system, Ginnie Mae is always looking for ways to extend its reach to local community lenders such as credit unions, state housing finance agencies (HFAs), minority depository institutions (MDIs) and community development financial institutions (CDFIs). These institutions do important work in some of the toughest communities to serve. Ginnie Mae is placing renewed emphasis on ways to support their affordable housing and community development. The goal is to create innovative pathways for lenders, in the heart of underserved communities, to utilize the Ginnie Mae MBS program and advance affordable housing nationwide. Combining the passion and localized expertise of small- and mission-driven lenders with the power and scale of the global capital markets would have a significant impact on housing finance and supply.
That is why, in the first quarter of 2022, Ginnie Mae created a CDFI Working Group to engage with CDFIs across the country to learn more about their business model and challenges. In July 2022, in conjunction with Ginnie Mae, HUD launched a CDFI Task Force to recommend ways to expand access to government-backed mortgage programs and the Ginnie Mae MBS platform.
Recently, Ginnie Mae issued APM 22-08, amending its capital requirements for federally insured credit unions and HFAs (All Participant Memorandum (APM) (ginniemae.gov)). Ginnie Mae recognizes that the capital requirements already mandated by federal insuring regulators, strengthen credit unions and ensure they are well capitalized. Ginnie Mae’s exemption of HFAs from its capital requirements acknowledges the reduced risk HFAs pose as instrumentalities of the states in which they serve. These changes to our institution-wide capital requirements accomplish two things – they harmonize our program requirements with standards enforced by federal credit union regulators and reflect the unique financial status of HFAs and credit unions who play critical roles in supporting community-based lending, particularly in underserved areas.
As supported in the President Biden’s Housing Supply Action Plan, (President Biden Announces New Actions to Ease the Burden of Housing Costs - The White House), Ginnie Mae, in conjunction with FHA and Treasury, has proposed making the Risk Share Initiative a permanent program at HUD within the Ginnie Mae MBS ecosystem. This move would enhance stability, increase liquidity for mortgage lending, and provide the benefit of Ginnie Mae’s guaranty, ultimately increasing affordable housing supply.
As a government corporation with a unique social mission, Ginnie Mae plays a critical role in advancing the Biden-Harris agenda to meet equity goals and close the housing supply gap. Our plans are ambitious but achievable. With strong industry and federal partnerships, we will continue to make housing more affordable, efficient, and equitable for all Americans.
I am proud to lead Ginnie Mae during this time, and to work alongside innovative, creative, and brilliant colleagues who are as focused on our core mission as I. Together, we will continue to expand our role in the affordable housing ecosystem while minimizing risks to taxpayers. We also do this work with an eye toward risk mitigation, ensuring the housing finance system remains vital, safe, and sustainable.
With 54 years of history and experience through all economic cycles, we have never faltered, always meeting our obligations to investors. Our full faith and credit guaranty, backed by the U.S. Treasury, is applied to all Ginnie Mae MBS. It is an extraordinary obligation that we uphold daily. I am committed to stewarding this government-owned and operated social-impact corporation through its era of transformation and digitalization, ensuring it remains strong and viable for generations to come.