Five Star Government Forum
March 25,2014
Ginnie Mae:
Program Overview and Insights
Discussion Overview
• Ginnie Mae’s Role in the Market
• Housing Finance Reform
• Evolving Industry Trends
• Ginnie Mae Ini...
Overview
• U.S. Government-owned corporation within HUD
• Guarantee Mortgage-Backed Securities (MBS), which raise funding ...
Ginnie Mae – Core Functions
• Servicers and Issuers are
approved based on financial,
management, and operational
capacity....
• A healthy financial institution that has generated positive earnings throughout the
recent crisis, Ginnie Mae continued ...
Ginnie Mae & Fannie/Freddie Loss Waterfall Comparison
Fannie/Freddie with Risk-shareGinnie Mae
First Dollar Loss
Last Doll...
Comparison of MBS System Models
Model Ginnie Mae GSE
Bipartisan Policy
Council (Proposed)
Issuer Lender GSE Lender
Credit ...
• The U.S. Government has had a significant role in the mortgage market going back at least
30 years
Government Support of...
TBA Market Overview
• To-Be-Announced (TBA) market was created in 1970s to support Ginnie
Mae securitization & financing o...
Stylized TBA Transaction Example
Day 1
Day 2 Through Settlement
Evolving Market: Ginnie Mae and GSE MBS
MBS outstanding in billions
Sources: Fannie Mae and Freddie Mac Monthly Reports; G...
Overall Industry Context and Trends
• Volume Drop: Conventional and government mortgage lending have
dropped significantly...
Change in Issuer Composition by Dollar Volume of
Servicing
2010 Issuance Volume: $414 B
Top 10 Issuers Comparison, 2011 & 2014
Top 10 Issuers by Outstanding Servicing as of Feb. 2014
Issuer
Rank
Issuer Name UPB...
Issuance Share by Government Agency (Dollar Volume)
VA has been a growing proportion of our issuance; ~35% in CY 2013
• VA has been a growing proportion of our issuance; ~35% in CY 2013
Issuance Share by Government Agency Loan Dollar Volume...
Ginnie Mae Modernization Initiative
• Modernized securitization platform for loan pooling, securities issuance,
data valid...
Ginnie Mae Initiatives
• Acknowledgment Agreements
• The use of Acknowledgement Agreements allows mortgage lenders to
pled...
Summary
• Ginnie Mae is:
– Delivering on its mission to support the government housing
programs with over 98% of governmen...
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Ginnie Mae's Housing Finance Reform Overview

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Ginnie Mae's Housing Finance Reform Overview

  1. 1. Five Star Government Forum March 25,2014 Ginnie Mae: Program Overview and Insights
  2. 2. Discussion Overview • Ginnie Mae’s Role in the Market • Housing Finance Reform • Evolving Industry Trends • Ginnie Mae Initiatives and Response
  3. 3. Overview • U.S. Government-owned corporation within HUD • Guarantee Mortgage-Backed Securities (MBS), which raise funding for virtually all loans insured or guaranteed by U.S. Government agencies (FHA, VA, USDA Rural Development) – Only MBS backed by full faith and credit guaranty of the U.S. government – Ginnie Mae does not originate loans or issue MBS, and thus has no exposure to credit risk • Facilitate financing of diverse products: – Single-family: forward & reverse mortgages, manufactured homes – Multifamily: construction & permanent loans, hospitals, nursing homes, assisted living facilities • Outstanding MBS guaranteed volume of nearly $1.5 trillion – Monthly issuance of $20 - 30 billion • Over 400 approved Issuers in program − Ginnie Mae manages counterparty risk at the Issuer level
  4. 4. Ginnie Mae – Core Functions • Servicers and Issuers are approved based on financial, management, and operational capacity. • Infrastructure must support pools that include loans from multiple guarantors and loans being serviced by multiple servicers. • A significant aspect of ensuring liquidity is acting as a conduit of information between servicers, guarantors, MBS investors, and policymakers. • Establish non-guarantee fees for utilizing the guarantee and services of Ginnie Mae. Establish Pooling Requirements for Ginnie Mae Securities Provide Infrastructure to Issue Sophisticated MBS Approve and Monitor Servicers/Issuers 3 2 1 Generate Loan Level Data for all loans in Ginnie Mae Pools at Issuance and Monthly 4 Remit Interest and Principal to MBS Investor 5 Generate Monthly Reporting on Ginnie Mae REMIC Securities as Required 6 Coordinate with MBS Stakeholders to Ensure Maximum Liquidity 7
  5. 5. • A healthy financial institution that has generated positive earnings throughout the recent crisis, Ginnie Mae continued this trend in FY 2013 with a profit of $628.4 million. • Ginnie Mae guarantees a portfolio of MBS backed by 9.1 million loans and nearly $1.5 trillion in current UPB. • Annual portfolio growth has been averaging 12.24% since FY 2010. • The portfolio composition consists by dollar volume of 69.7% FHA loans; 24.3% VA loans; and 5.8% RHS loans. • The composition of pools issued in 2013 consisted of 61% FHA loans, 34% VA loans, and 5.5% RHS loans. Ginnie Mae: Guaranteed MBS Portfolio Overview
  6. 6. Ginnie Mae & Fannie/Freddie Loss Waterfall Comparison Fannie/Freddie with Risk-shareGinnie Mae First Dollar Loss Last Dollar Loss LOSSES Government Agency Credit Enhancement* Corporate Resources of Issuer/ Servicer Ginnie Mae Relative Loss Position $ First Dollar Loss Last Dollar Loss LOSSES Homeowner Equity Fannie/ Freddie Relative Loss Position $ Private Mortgage Insurance** *VA covers the first 25% of the credit loss, USDA-RHS covers the first 90%, and FHA covers 100%. Coverage of foreclosure expenses vary by agency; uncovered expenses can be substantial **Private Mortgage Insurance (PMI) is only required for loans with > 80% LTV; loans with ≤ 80% LTV have no PMI ***Private Credit Enhancement is the result of a recent FHFA mandate on GSE lending requiring risk-share Private Credit Enhancement*** Homeowner Equity
  7. 7. Comparison of MBS System Models Model Ginnie Mae GSE Bipartisan Policy Council (Proposed) Issuer Lender GSE Lender Credit Risk Holder FHA, VA, USDA/Lender GSE/PMI/Risk-Share Investor Private Entities Nature of Govt. Guaranty Explicit Implicit Explicit Govt. Guarantor Counterparty Issuer/Servicer Borrower/ PMI/Risk-Share Investor Private Credit Enhancer Govt. Place in Loss Waterfall* Fourth Second/ Third (in case of PMI on loans w/LTV>80 or Risk-Share deal) Third Guarantors Supported by the Program Four (FHA, VA, RHS, and PIH) One Multiple *See Preceding Slide
  8. 8. • The U.S. Government has had a significant role in the mortgage market going back at least 30 years Government Support of Mortgages Commercial banks Savings & loans Government agencies & government-sponsoreed enterprises (government-backed mortgage pools & loans in portfolio) Private mortgage conduits Other (credit unions, pension funds, individuals, etc.) Life insurance companies 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: Federal Reserve Single-Family Mortgage Market Share 1955-2013
  9. 9. TBA Market Overview • To-Be-Announced (TBA) market was created in 1970s to support Ginnie Mae securitization & financing of government insured loans – Virtually all government insured mortgages are sold into the TBA market – sold as part of MBS guaranteed by Ginnie Mae, Fannie Mae & Freddie Mac • Facilitates forward trading of mortgages (delivery can take over three months, on average takes two months) • Enables lenders to lock in rate for loan originations prior to actually originating loans • Ginnie Mae has little operational risk through the TBA process. • TBA securities have U.S. Government guaranty, which facilitates scale of market & fungibility of securities • Ginnie Mae TBA provides a reliable and highly utilized conduit to the market.
  10. 10. Stylized TBA Transaction Example Day 1 Day 2 Through Settlement
  11. 11. Evolving Market: Ginnie Mae and GSE MBS MBS outstanding in billions Sources: Fannie Mae and Freddie Mac Monthly Reports; Ginnie Mae data includes HECMs Dec 2013: $2,804B Dec 2013: $1,482B Dec 2013: $1,622B
  12. 12. Overall Industry Context and Trends • Volume Drop: Conventional and government mortgage lending have dropped significantly. In the last 9 months, Ginnie Mae’s monthly issuance volume has dropped from a high of $42 billion per month last June to a low of less than $23 billion per month in December 2013. • Implications: Lender/Servicer financial viability issues • Refi to Purchase Money Mortgage: In contrast to GSEs, Ginnie Mae MBS have contained a higher percentage of purchase money mortgages. As refi volume has decreased, Ginnie Mae’s relative market share has increased from 25% in CY 2012 to 31% in February 2014. • Changing Issuer Profile: Litigation risk, regulatory risk, reputation risk, and Basel capital requirements have prompted Depository Institutions to shrink their servicing operations and through sale of MSRs to rapidly growing Non- Depository Institutions.
  13. 13. Change in Issuer Composition by Dollar Volume of Servicing 2010 Issuance Volume: $414 B
  14. 14. Top 10 Issuers Comparison, 2011 & 2014 Top 10 Issuers by Outstanding Servicing as of Feb. 2014 Issuer Rank Issuer Name UPB % of Portfolio UPB 1 WELLS FARGO BANK, NA $420,655,223,418 31.7% 2 JP MORGAN CHASE BANK, NA $155,944,540,551 11.8% 3 BANK OF AMERICA, NA $117,011,541,853 8.8% 4 U. S. BANK, NA $52,736,873,688 3.9% 5 NATIONSTAR MORTGAGE, LLC $48,184,121,245 4.0% 6 LAKEVIEW LOAN SERVICING, LLC $33,727,476,332 2.5% 7 PENNYMAC LOAN SERVICES, LLC $33,481,587,994 2.5% 8 FREEDOM MORTGAGE CORPORATION $32,231,265,775 2.4% 9 OCWEN LOAN SERVICING, LLC $29,753,915,201 2.2% 10 QUICKEN LOANS, INC $28,693,270,683 2.2% Total Top 10 Issuers $952,419,816,740 72.6% Total Ginnie Mae Single-family Portfolio: $1,326,685,913,879 Top 10 Issuers by Outstanding Servicing as of Sept. 2011 Issuer Rank Issuer Name UPB % of Portfolio UPB 1 WELLS FARGO BANK, NA $334,218,512,030 29.8% 2 BANK OF AMERICA, NA $315,768,619,002 28.2% 3 JP MORGAN CHASE BANK, NA $102,983,003,938 9.2% 4 GMAC MORTGAGE, LLC $46,662,945,083 4.2% 5 CITIMORTGAGE, INC $41,106,617,883 3.7% 6 U. S. BANK, NA $38,525,869,511 3.4% 7 PHH MORTGAGE CORPORATION $26,437,504,266 2.4% 8 FLAGSTAR BANK, FSB $20,293,227,800 1.8% 9 PNC BANK, NA $18,345,896,742 1.6% 10 SUNTRUST MORTGAGE, INC $17,986,640,183 1.6% Total Top 10 Issuers $962,328,836,438 85.8% Total Ginnie Mae Single-family Portfolio: $1,121,090,272,175
  15. 15. Issuance Share by Government Agency (Dollar Volume) VA has been a growing proportion of our issuance; ~35% in CY 2013
  16. 16. • VA has been a growing proportion of our issuance; ~35% in CY 2013 Issuance Share by Government Agency Loan Dollar Volume 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2010 2011 2012 2013* Ginnie Mae Issuance Share by Govt. Agency Volume FHA VA RHS/PIH *Through November
  17. 17. Ginnie Mae Modernization Initiative • Modernized securitization platform for loan pooling, securities issuance, data validation & disclosures distribution • Our platform processes approximately $20 Billion in monthly payments on the 9 million loans in our MBS and distributes funds to investors. • Creates new MBS for 110,000 – 130,000 new loans each month. • MISMO Implementation and Leadership • Leading federal government in implementation of MISMO adoption • Publication of loan-level data disclosures for 2013 & 2014 • Loan-Level data for new Single-Family loans released August 2013 • Loan-Level data for existing Single-Family loans released December 2013 • Publish over 34 million pool-level & 327 million loan-level data points a month • Targeting Q3 2014 for release of HMBS Enhanced Pool Disclosure and Phase II of HMBS loan-level disclosures.
  18. 18. Ginnie Mae Initiatives • Acknowledgment Agreements • The use of Acknowledgement Agreements allows mortgage lenders to pledge their Ginnie Mae mortgage servicing rights in order to gain access to liquidity and to meet capital structure strategies. • Ginnie Mae I and Ginnie Mae II Modernization • Evaluating the merger of the Ginnie Mae I and Ginnie Mae II programs to enhance market liquidity. • FHLB Chicago Conduit Issuer Project • FHLB Chicago is a Ginnie Mae Issuer, will buy loans from PFIs, aggregate them & through Ginnie Mae deliver them to investors • PFIs will have the option to retain or sell servicing on loans • Coordination Among Government Housing Agencies • Joint federal housing agencies including FHA, VA, RHS, FHFA, CFPB now meeting regularly to discuss housing policy, risk issues, and best practices.
  19. 19. Summary • Ginnie Mae is: – Delivering on its mission to support the government housing programs with over 98% of government housing loans in Ginnie Mae MBS. – Making money for the government and supporting the housing programs with a minimum of risk. – Exercising leadership in standardization activities like MISMO and in making more information available to investors. – Responding to the needs of our industry with funding mechanisms and collaborative pilot programs to continue to find ways to support American homebuyers and renters.
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