Remarks by Ted Tozer, President, Ginnie Mae
2013 Mortgage Bankers Association Secondary Market Conference & Expo
"Secondary Market Executives Update"
Monday, May 06, 2013
New York, NY
I want to get through a couple of systems changes that are going on at Ginnie Mae; things we’ve done this past year. Then I’ll touch on a couple of other initiatives so I can stay within the 10-minute rule Garry [Cipponeri] gave us.
As Garry said, we should be close to breaking $1.4 trillion in outstanding securities with our April issuance. Year to date — our year starts October 1— we have issued $272 billion worth of securities, compared to $260 billion in the same period last year. We did $388 billion in issuance in 2012. So we will probably break the $400 billion mark this year, based on current projections.
Right now, with our partners at FHA, VA, and Rural Housing, we are accounting for about half of the purchase activity that’s going on in the country right now.
People do wonder about us approving Issuers, and we do approve them. Over the last two and a half years, we’ve approved more than 105 new Issuers. To give you some more statistics, right now, our approved Issuer base stands at about 420 Issuers; we increase our base of Issuers every month.
As far as our securitization platform, currently we have just under nine million loans in our securities, and we have 3,000 pools we report on every month. We release 34 million pieces of data on our pools every month. There’s a lot of data that runs through our program.
To talk about the initiatives we have, regarding the amount of data we put out, we’re trying to modernize our securitization platform and systems. We’re progressing in that process. We are moving off our old mainframe to a server-type environment. And you’re going to see changes in the way you do business with us that should be positive as we start rolling out different types of features in six to nine months. Again, you’ll be hearing from us; we’re engaging a lot of the Issuer base to make sure we’re hitting its needs with the new platform.
We’re in a situation, too, where we’re moving to the new MISMO standards with our data, we are working with the industry on that going forward.
Another issue we’re dealing with now is the concept of the FHA and VA market share being pulled back. I hear about it all the time from policymakers. With overall bond volumes eventually coming down, we’re looking at the possibility of merging our Ginnie Mae I and Ginnie Mae II programs into one program. We are meeting with a group of Issuers as well as investors to understand the complexities of that process because we feel it’s important we have their input. Bifurcating the volume into two securities in today’s world doesn’t make a whole lot of sense, so we’re looking at how to merge the two with minimal disruption to the marketplace. You’ll be hearing more and more of that as we start our outreach in the next few months to understand the potential pitfalls in moving forward. This merger will be a huge initiative for us; Ginnie Mae I is the original security, it was first issued in the 1970s. This is a nearly 50-year-old program that we’ve been looking to potentially merge into the Ginnie Mae II program.
The last thing I want to touch base on is that we really are concerned about liquidity in the market and making sure that Ginnie Mae is servicing trades as well as possible. Because of that, we have rolled out our acknowledgment agreement that we’ve been talking about for a couple of years. We’re getting some pretty good traction on that as far as people using it as a way to finance their MSRs and to raise cash. But we’re also trying to make the document as flexible as possible. We’re trying to bring liquidity to the Ginnie Mae market and give support to you as Issuers.
Those are the issues we are looking at right now. Again, you’ll hear a lot about the Ginnie I and II merger as we start rolling it out.
Moderator: So you’re eliminating the Ginnie Mae I, but aren’t you going to start a third program in essence because you’ll have customs that are eligible for TBA and customs that are not eligible?
Tozer: Not really. We’re in a situation where you just have the customs that are out there, conventions that were done for low amounts, that would basically be eligible for TBA, they wouldn’t really be a third program. The third security is more of a concept that you would have Fannie [Mae] and Freddie [Mac] doing. The baseline for TBA eligibility would be the multi-lender pool, but you could also have a limited number of custom pools that would also be TBA eligible. We’re looking at all the options, weighing the pros and cons, and over the next few months, we’re going to be talking to all the stakeholders.
Moderator: The question is around raising “G” fees. We’ve seen “G” fees raised as well as MIPs for FHA.
Tozer: Our “G” fee is not going to go up. As far as MIPs for FHA — that might be something they’re looking at — not so much in terms of selection but more in terms of balancing the business with the GSEs to make sure their footprint makes sense. I think FHA is very comfortable with their current MIP level. It’s more than adequate to cover their credit exposure, so now it’s more of a policy issue. I don’t think there are plans for FHA to do anything as far as its premiums. Again, they’re comfortable with the book of business they’re getting as far as the below-680 FICO score. They think that the premiums are adequate to cover the profile for that borrower.