A Message from Terry Carr, Senior Advisor, Communications and Congressional Relations
2012 proved to be another productive year for Ginnie Mae. As the industry started to show greater signs of stabilization with steady gains in home values, we continued to provide sound leadership and stability to the nation’s recovering housing market. For details on Ginnie Mae’s financial and business performance, I would encourage you to read our 2012 Report to Congress.
In November, Ginnie Mae released its fiscal year (FY) 2012 financials press release, which highlighted our continued growth throughout the year. Our FY 2012 performance demonstrated that Ginnie Mae remains an excellent example of smart, efficient and effective government. We posted increased revenues of $1.25 billion, a net profit of $609.60 million and $16.37 billion in retained earnings. Ginnie Mae also increased its multifamily mortgage-backed securities (MBS) portfolio to $67.4 billion in FY 2012 – helping to finance 1,583 apartment building loans, 16 hospital loans and 675 nursing home loans. In addition, we issued $388 billion in MBS during FY 2012, including $360 billion in single-family MBS issuance, further demonstrating our role as a source of strength in the industry.
Ginnie Mae took aggressive steps in FY 2012 to enhance its technology, infrastructure and staffing expertise. These activities were intended to help Ginnie Mae meet the expanding needs of the market. Significant progress has been made toward creating a stronger, more responsive organization. And, we’ve done so by focusing on three primary objectives:
- Creating a more stakeholder-centric organization;
- Enhancing our securitization platform; and
- Increasing our risk management practices.
Bearing these objectives in mind, the following are some highlights of our accomplishments from 2012:
Creating a More Stakeholder-centric Organization
Growing a Diverse Issuer Base – During 2012, Ginnie Mae focused on building a viable, diverse Issuer base. We took steps to make the program more appealing to small lenders and began reaching out to community lenders to directly participate in the Ginnie Mae program. We also started to encourage lenders to form cooperatives to provide better access to the Ginnie Mae program. These efforts have helped Ginnie Mae understand and respond to the needs of our growing Issuer base. Just two years ago, 90 percent of Ginnie Mae’s single-family issuance volume came from 10 Issuers, compared to the 25 Issuers that managed 90 percent of that volume by the end of FY 2012. Further, we had 245 active Issuers in our program in FY 2011. In FY 2012, that number grew almost 10 percent to 269 active Issuers.
Expanding Reach to Foreign Markets – This past year, Ginnie Mae put more emphasis on expanding its international investor base while looking for new ways to identify, attract and partner with others in the capital markets. Senior Vice President John Getchis joined our team in the summer of 2012 to lead the Office of Capital Markets and help deliver on Ginnie Mae’s commitment to increase the scale and scope of its capital markets function, while expanding global investor interest in its MBS programs. Ginnie Mae’s executives participated in numerous global capital markets activities throughout the year, making several trips abroad to Asia, the United Kingdom and other European countries to meet with members of the international investment community. Discussions focused on the Ginnie Mae program, its features and benefits, expanded disclosure information and enhanced risk management capabilities. We also met with several foreign delegations in 2012, including those from Russia and Denmark, to provide them with a better understanding of the success of the Ginnie Mae business model.
Improving Ginnie Mae’s Callable Note Program – To further appeal to a broader range of MBS investors, Ginnie Mae announced in September enhancements to our Callable Note Program. These changes, which took effect in November 2012, allow for more flexible structure terms and customized call features, thereby attracting different investors to Ginnie Mae’s program.
Partnering With Other Government Agencies – Throughout the year, Ginnie Mae expanded its ability to act as a conduit of market information between the government and industry to proactively work with other government agencies in response to initiatives that improve the industry. For example, Ginnie Mae President Ted Tozer led discussions at the White House Refinance Roundtables in Cincinnati and Columbus, Ohio, Pittsburgh, Pa., and Raleigh, N.C. Because of its unique position in the industry, Ginnie Mae also led the Joint Federal Housing Agencies [FHA, Department of Veterans Affairs (VA), Department of Agriculture’s Rural Development (RD) and the Department of Housing and Urban Development's Office of Public and Indian Housing (PIH)] roundtable meetings throughout the year. The first of its kind, these meetings provided a platform for the agencies to share information and discuss issues facing the industry today. Further, Ginnie Mae directly participated in the Consumer Financial Protection Bureau’s (CFPB) consultative process for rules under the Dodd-Frank Act, among other regulations and statutes.
Enhancing Our Securitization Platform
Upgrading Technology & Data Infrastructure – Access to timely, accurate and relevant data is a top priority for Ginnie Mae. As such, Ginnie Mae continued to modernize its Integrated Pool Management System, a system central to the functionalities surrounding issuing pools, reporting factors and making payments to security holders. In 2012, Ginnie Mae created the Office of Enterprise Data and Technology Solutions so that its information technology and data assets had stronger management and governance oversight.
Increasing Transparency & Loan Level Disclosure – To more effectively meet the needs of our investors, we announced that by fourth quarter of 2013, we expect to make loan level disclosure available. In 2012, Ginnie Mae announced that it would require delivery of four new data elements: First-Time Homebuyer Indicator, Third-Party Origination Type, upfront Mortgage Insurance Premium (MIP) Rate and Annual MIP Rate. We also announced that advance publication of CUSIP and pool number information would be available on Ginnie Mae’s website. Advance CUSIP and pool number distribution improves a lender’s ability to sell loans globally, which in turn, offers better pricing to borrowers. In addition, beginning in May 2012 we accelerated the release of monthly data disclosure and published Ginnie Mae’s Consolidated Disclosure Data Dictionary. Providing this data to the market illustrates Ginnie Mae’s ongoing commitment to increasing the transparency of the mortgage loans backing its securities.
Increasing Risk Management Practices
Because the housing market relies on the countercyclical role of Ginnie Mae, maintaining the safety and stability of the organization is imperative. In FY 2012, we continued to vigorously monitor aggregate risk and compliance with risk management policies through a variety of initiatives, including:
Enhancing Issuer Approval Process and Monitoring Performance – We continually evaluate and enhance our Issuer application review and approval process to ensure that we are bringing new, high-quality Issuers of all sizes to the table to best serve the industry. In addition, we improved our onsite compliance field reviews this past year to ensure that procedures are keeping pace with current needs and industry developments. We also launched Onsite Operational Field Reviews, which examine an Issuer’s staff, infrastructure, quality assurance and business practices.
Providing Issuers with Additional Tools – In addition to the attention given to our Issuer approval process, we are just as committed to ensuring that, once in our program, our Issuers perform at the highest level. To better help Issuers succeed in the Ginnie Mae program, we developed a standardized, multi-tiered training program for all new and existing Issuers to help them conduct business more effectively with Ginnie Mae. Our regular webinars and roundtable sessions with Issuers continue to provide us with candid and detailed feedback, helping to foster the effective implementation of such program changes.
Addressing Counterparty & Operational Risk – In 2012, Ginnie Mae enhanced its risk capabilities with the development of its own in-house risk team, the Office of Enterprise Risk, led by Ginnie Mae’s Chief Risk Officer Greg Keith. The unit guides Ginnie Mae through a more holistic approach to monitoring, measuring and evaluating counterparty risk. In addition to stringently evaluating such elements as FHA insurance status, portfolio delinquency levels, capital adequacy and audited financial statements, we are also paying close attention to servicing capacity and the aggregate risk a single entity may pose to the program. Ginnie Mae is also focused on several other control structures to further enhance risk mitigation including developing an enterprise risk policy and enhancing operational risk assessments.
We are steadfast in taking the necessary steps to ensure that our organization is a strong and reliable leader in the housing finance market. As we embark on 2013, we look forward to ongoing success in our business performance. We also welcome new opportunities to provide solutions designed to address the challenges facing our investors, Issuers and other business partners.
In closing, we thank you for your support in Ginnie Mae. It is a privilege to play such a vital role in our nation’s economic recovery efforts.
Senior Advisor, Communications and Congressional Relations