A Message from Terry Carr, Senior Advisor, Communications & Congressional Relations
John F. Getchis recently joined Ginnie Mae’s leadership team as the senior vice president, Office of Capital Markets. John’s role focuses on the organization’s commitment to increase the scale and scope of its capital markets function, including routinely administering Ginnie Mae’s multi-class securities programs and maintaining relationships with key capital market participants.
In this Q&A, John answers questions about his new responsibilities at Ginnie Mae, the goals of the Office of Capital Markets and the current market environment.
You recently joined Ginnie Mae as the senior vice president of the Office of Capital Markets. Briefly, tell our readers about your background and why you decided to join Ginnie Mae.
Having spent 35 years in the mortgage capital markets, I’ve been fortunate enough to witness tremendous expansion in this sector. This growth has been a direct result of product innovation from the Real Estate Mortgage Investment Conduits (REMIC) tax legislation, increased global investor development and the application of information technology to enhance the analysis of mortgage-backed securities (MBS). My experience across various roles throughout my career – as an accountant, financial analyst, investment banker, mortgage trader, structured finance product manager and Chief Operating Officer of a securities brokerage and dealer company – has provided me with first-hand knowledge on what it takes to encourage and support this type of market growth.
Professionally, I have always found myself in very dynamic environments – from rapid growth in the best of times, to the recent housing crisis where we saw significant retrenchment and restructuring. This unique opportunity at Ginnie Mae combines these dynamic qualities and allows me to work in both the capital and the lending markets. Being associated with such an important organization makes me, and the entire Ginnie Mae team, a part of this noble mission to bring domestic and global capital to the nation’s housing market at a time when there is still a significant need.
What makes Ginnie Mae securities attractive to investors?
The events of the past few years have reinforced that Ginnie Mae’s business model provides a compelling value proposition to market participants, as it is capable of weathering, and even thriving in, all economic environments. Even at the height of the housing crisis, Ginnie Mae remained self-sustaining, posting positive surplus results and meeting all of its guaranty obligations to investors for the timely payment of principal and interest.
Ginnie Mae’s history of performance, the explicit full faith and credit guaranty of the U.S. government and the opportunity for investors to obtain higher yields, makes our securities attractive to domestic and international investors. Also, Ginnie Mae securities can be tailored with multi-class characteristics that can change a specific security’s profile, thereby becoming more attractive to the global investor community.
What are Ginnie Mae and the Office of Capital Markets doing to shape their future roles in the housing market?
Ginnie Mae continues to update and enhance its business processes and infrastructure so that the ever-growing and evolving demands of the housing market are met. Ginnie Mae is currently investing in more robust information systems, developing a more dynamic risk management regimen and expanding Issuer monitoring and building more operational flexibility. Ginnie Mae is also investing more in human resources to expand and bolster its existing roster of skilled employees. These efforts will benefit the Office of Capital Markets by enabling our team to add new features to our existing suite of products and respond more efficiently and effectively to Issuer and investor needs.
Ginnie Mae’s Office of Capital Markets also plays an instrumental role in shaping the future of the housing market. By continuing to focus on investor awareness and MBS program improvements, our team remains integral to bringing global capital into the U.S. housing system. We will continue to review and revise our program features accordingly to respond to market conditions.
What do you think are the biggest challenges facing Ginnie Mae today? Where do you see the greatest opportunities?
I believe one of Ginnie Mae’s primary challenges is maintaining the delicate balance of monitoring the financial health of our Issuers, while simultaneously implementing policies and programs that aid in their performance. The administration of the Dodd-Frank Act and Basel III reforms will increase the level of capital required of mortgage originators as well as the level of disclosure to consumers. Moreover, additional servicing responsibilities and exposure to more “rep and warrants” obligations are all expected outcomes of these regulatory initiatives.
Such changes emphasize further the significance of having a large and well-diversified group of healthy Issuers. This diversification, in turn, requires establishing more dynamic risk assessments and capital requirements for those Issuers that participate in Ginnie Mae MBS programs. While the Office of Capital Markets has not typically focused on Issuers’ challenges, there seems to be great potential for us to help create solutions that can provide some form of relief to their capital rationing.
Particularly for the Office of Capital Markets, the future of the government-sponsored enterprises (GSEs) may present Ginnie Mae with tremendous opportunity. Future actions taken by the Federal Housing Finance Agency (FHFA), as Conservator of Fannie Mae and Freddie Mac, may increase the demand for the Federal Housing Administration (FHA) and the U.S. Department of Veterans’ Affairs (VA) to fill the lending gap. Ginnie Mae will also need to be resolute in its ability to attract a global investor base.
What are your plans and priorities for the Office of Capital Markets for FY 2013? How will those priorities impact Ginnie Mae’s long-standing strength in the housing market?
The top priority for Ginnie Mae’s Office of Capital Markets in FY 2013 is to expand global investor interest in its MBS programs. To do so, we must deliver responsive solutions to market participants and key stakeholders. This priority will be accomplished through several initiatives. First, we will continue to establish awareness and generate interest in Ginnie Mae’s suite of multi-class securities products and programs among international investors. This will be done through our Global Investor Initiative, which was launched earlier this year and helps to direct investor outreach in several global markets. Second, the office will introduce additional features to the multi-class securities programs that will appeal to a broader and deeper base of institutional investors and securities dealers. For example, planned changes to Ginnie Mae’s Callable Note Program now underway will allow for more flexible structure terms. These modifications will allow call features to be more customized, thereby attracting different investors to the program. Effective for November 2012 transactions, more on this program change can be found here. And, lastly, we will focus significant effort to provide access to more loan and pool information about Ginnie Mae’s MBS program so that all investors may confidently evaluate their holdings. In fact, we have already started collecting additional data on the underlying collateral that back outstanding Ginnie Mae securities and remain committed to continuing to provide greater transparency in the year ahead.
Together with the Department of Housing and Urban Development (HUD) and FHA, we strive to provide affordable housing for all Americans and to help keep families in their homes. Because of this important mission, it is essential for Ginnie Mae to make every effort possible to continually improve its transparency with respect to the content of our products. The Office of Capital Markets will make this an ongoing priority.