Skip Ribbon Commands Skip to main content
gmlogo searchimage
bannerimage
Ginnie In Brief
 
Search
Share
* To
* From
Message
URL
http://test.ginniemae.gov/newsroom/ginnieinbrief/Pages/default.aspx
Print Friendly

Ginnie In Brief

Sort by: Newest | Oldest
GM_brief_CounterpartyRisk_Featured2
by Michael R. Drayne | 6/29/2020

Today Ginnie Mae published APM20-07, which announces changes to our policy concerning the re-pooling of certain loans that have been bought out of pools. These changes were driven by the borrower relief and loss mitigation policies implemented by the insuring and guaranteeing agencies (HUD, VA, and USDA) in response to the COVID-19 national emergency, and our analysis of how those policies might affect the performance of Ginnie Mae securities and the future price of credit under the federal mortgage programs.-07, which announces changes to our policy concerning the re-pooling of certain loans that have been bought out of pools. These changes were driven by the borrower relief and loss mitigation policies implemented by the insuring and guaranteeing agencies (HUD, VA, and USDA) in response to the COVID-19 national emergency, and our analysis of how those policies might affect the performance of Ginnie Mae securities and the future price of credit under the federal mortgage programs.

At the heart of this is the issuer’s option to buy a loan out of a pool after 90 days of delinquency. The buyout option exists because – in contrast to the Government Sponsored Enterprises – Ginnie Mae is not the issuer of the pools it guarantees, and does not utilize its own balance sheet to manage delinquencies (in the normal course). The buyout option therefore gives an issuer the ability to have some control over its exposure to the scheduled principal and interest pass-through requirement that applies to loans in pools, as well as to Ginnie Mae’s delinquency thresholds, from which Ginnie Mae has also provided relief to issuers as part of our response to the national emergency.

As with refinances, buyouts can cause an economic loss for security holders when mortgage-backed securities trade at premium prices. As a general matter, the risk of such losses is a normal consequence of investing in this asset class. What Ginnie Mae guards against in particular, however, are scenarios where liquidations (and losses) occur as the result of unanticipated events or gaps in government policy – the risk being that a commensurate loss of confidence in the security on the part of investors would translate into lower security prices and ultimately a higher cost for the homeowners the program is intended to serve.

A combination of circumstances arising out of COVID-19 presents a high risk of triggering buyout activity that could undermine the integrity of the MBS program, namely transactions in which resolution of a delinquency is known to come from an agency insurance or guaranty payment that does not require a buyout – but where a buyout is executed anyway solely to allow the issuer to capture premium security pricing.

Ideally, Ginnie Mae would prohibit only those types of buyouts. But in practice, it is impossible to identify those types of buyouts as they happen; buyouts can occur at different times and are driven by a variety of considerations. Care must be taken, in protecting against transactions that could be harmful to the program, to impinge as little as possible on the ability to buy out loans in the manner the program terms are intended to facilitate.

For this reason, Ginnie Mae’s approach to the unique COVID-19 circumstances is to leave the buyout rules unaltered and instead place restrictions on the ability to re-pool certain re-performing mortgages previously bought out of pools. This should lessen the economic incentives to strategically buy out loans in a way that may be harmful to the integrity of the MBS program (as more fully detailed in APM 20-07), while still maintaining an avenue to redeliver loans into securities guaranteed by Ginnie Mae.

While we recognize that this approach may not be fully satisfactory to any of the constituencies that are affected by buyout and re-pooling transactions, we believe that it represents a reasonable and appropriate balancing of the interests at stake and maintains the focus appropriately on the loss mitigation activities that will help affected homeowners.

ticker board
by Ginnie Mae | 6/26/2020

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Integer nec odio. Praesent libero. Sed cursus ante dapibus diam. Sed nisi. Nulla quis sem at nibh elementum imperdiet. Duis sagittis ipsum. Praesent mauris. Fusce nec tellus sed augue semper porta. Mauris massa. Vestibulum lacinia arcu eget nulla. Class aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos. 


Curabitur sodales ligula in libero. Sed dignissim lacinia nunc. Curabitur tortor. Pellentesque nibh. Aenean quam. In scelerisque sem at dolor. Maecenas mattis. Sed convallis tristique sem. Proin ut ligula vel nunc egestas porttitor. Morbi lectus risus, iaculis vel, suscipit quis, luctus non, massa. Fusce ac turpis quis ligula lacinia aliquet. Mauris ipsum. Nulla metus metus, ullamcorper vel, tincidunt sed, euismod in, nibh. Quisque volutpat condimentum velit. 



flag over porch
by Ginnie Mae | 6/25/2020

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Integer nec odio. Praesent libero. Sed cursus ante dapibus diam. Sed nisi. Nulla quis sem at nibh elementum imperdiet. Duis sagittis ipsum. Praesent mauris. Fusce nec tellus sed augue semper porta. Mauris massa. Vestibulum lacinia arcu eget nulla. Class aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos. 


Curabitur sodales ligula in libero. Sed dignissim lacinia nunc. Curabitur tortor. Pellentesque nibh. Aenean quam. In scelerisque sem at dolor. Maecenas mattis. Sed convallis tristique sem. Proin ut ligula vel nunc egestas porttitor. Morbi lectus risus, iaculis vel, suscipit quis, luctus non, massa. Fusce ac turpis quis ligula lacinia aliquet. Mauris ipsum. Nulla metus metus, ullamcorper vel, tincidunt sed, euismod in, nibh. Quisque volutpat condimentum velit. ​

gm_ginniegrowth
by Ginnie Mae | 6/25/2020

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Integer nec odio. Praesent libero. Sed cursus ante dapibus diam. Sed nisi. Nulla quis sem at nibh elementum imperdiet. Duis sagittis ipsum. Praesent mauris. Fusce nec tellus sed augue semper porta. Mauris massa. Vestibulum lacinia arcu eget nulla. Class aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos. 


Curabitur sodales ligula in libero. Sed dignissim lacinia nunc. Curabitur tortor. Pellentesque nibh. Aenean quam. In scelerisque sem at dolor. Maecenas mattis. Sed convallis tristique sem. Proin ut ligula vel nunc egestas porttitor. Morbi lectus risus, iaculis vel, suscipit quis, luctus non, massa. Fusce ac turpis quis ligula lacinia aliquet. Mauris ipsum. Nulla metus metus, ullamcorper vel, tincidunt sed, euismod in, nibh. Quisque volutpat condimentum velit. ​

neighboorhood street with flag
by Alven Lam | 6/22/2020

At Ginnie Mae we are committed to our mission of bringing global capital into the American housing finance system. The mobilization of investment into Ginnie Mae mortgage-backed securities (MBS), from capital markets throughout the world, ensures borrowers from different walks of life—including first-time home buyers, lower-income home buyers, veterans or those living in rural areas—can access affordable housing finance, even in the worst of times. The insurance and guarantees placed on the loans in Ginnie Mae securities attract investors concerned about credit risk with other fixed income products.

The full faith and credit guaranty of the United States government on Ginnie Mae MBS and multiclass securities is another reason that our products are attractive to investors. The Ginnie Mae guaranty gives confidence to our security holders, this explicit pledge makes Ginnie Mae MBS products unique and valuable investment vehicles. The guaranty means investors receive scheduled principal and interest (P&I) payments regardless of the circumstance.

During the worst economic conditions and disasters, investors in Ginnie Mae MBS have received their P&I payments on time without disruption to their scheduled delivery. The ongoing COVID-19 pandemic is no exception. The coronavirus emergency is one of many examples in our 50 plus years where Ginnie Mae provides liquidity and stability into the U.S. housing finance sector amidst crisis. Despite the hardship experienced here at home and abroad, global investors continue to invest in Ginnie Mae MBS with confidence that all scheduled payments will be made on time and in full.

Declining treasury rates in the broader fixed income space have led to increased demand for Ginnie Mae MBS with comparatively higher yields versus other sovereign debt. Moreover, international demand for Ginnie Mae MBS has been particularly strong for those global investors seeking to place their capital outside of bonds with lower rates in local and regional bond markets. Accordingly, those investors who successfully manage interest rate and prepayment risks can obtain a yield premium over similar duration U.S. treasury notes.

Investment demand for Ginnie Mae MBS hasn’t slowed since the 2008-2009 financial crisis, when production of new securities and associated investor demand for Ginnie Mae MBS grew from $400 billion outstanding to more than $2 trillion in ten years. Most recently, in May 2020, Ginnie Mae MBS production reached $63.44 billion in issuance and $2.149 trillion in total outstanding principal balance. This continued level of investment helped an additional 235,000 borrowers obtain affordable housing credit. Such accomplishments come from the close work of Ginnie Mae stakeholders involved throughout the MBS and multiclass securities programs.

Ginnie Mae collaborates with partners and stakeholders working with market participants to address liquidity concerns and advance payments. The Pass-Through Assistance Program (PTAP), implemented in response to the COVID-19 National Emergency, has minimized disruptions for mortgage servicers during the coronavirus emergency. The PTAP has also mitigated risks for the U.S. taxpayer, another key component of Ginnie Mae’s role as the guarantor of last resort, by helping to prevent disruption to the mortgage servicing market while implementing various policies aimed at helping borrowers experiencing financial distress.

Another key component of Ginnie Mae operations is to engage with global investors. We conduct robust engagements with institutional investors to raise awareness, answer questions and obtain feedback on Ginnie Mae’s securities programs. In these engagements with investors spanning relevant capital markets actors, we share global market analysis insights and trends on U.S. housing finance markets in a variety of media, including: teleconferences, monthly reports and policy updates. These engagements also solicit input and feedback from investors about Ginnie Mae’s programs. As a result, our investor engagements facilitate valuable input on market perspectives that contribute to decision-making as Ginnie Mae consistently strives for the best in the evaluation of the securities programs and their operations.

Our $2.1 trillion portfolio of MBS principal balance outstanding demonstrates the worldwide trust investors and policymakers place in Ginnie Mae and its products. Our staff of about 150 people is highly skilled with deep knowledge and strong ties to the industry. As such, we are committed to the best in both business and government administration. Our longstanding experience and expertise will ensure we continue to channel investment into the U.S. housing finance system and minimize risks for the U.S. taxpayer—no matter the challenge.

View All

Ginnie In Brief

Sort by: Newest | Oldest
GM_brief_CounterpartyRisk_Featured2
by Michael R. Drayne | 6/29/2020

Today Ginnie Mae published APM20-07, which announces changes to our policy concerning the re-pooling of certain loans that have been bought out of pools. These changes were driven by the borrower relief and loss mitigation policies implemented by the insuring and guaranteeing agencies (HUD, VA, and USDA) in response to the COVID-19 national emergency, and our analysis of how those policies might affect the performance of Ginnie Mae securities and the future price of credit under the federal mortgage programs.-07, which announces changes to our policy concerning the re-pooling of certain loans that have been bought out of pools. These changes were driven by the borrower relief and loss mitigation policies implemented by the insuring and guaranteeing agencies (HUD, VA, and USDA) in response to the COVID-19 national emergency, and our analysis of how those policies might affect the performance of Ginnie Mae securities and the future price of credit under the federal mortgage programs.

At the heart of this is the issuer’s option to buy a loan out of a pool after 90 days of delinquency. The buyout option exists because – in contrast to the Government Sponsored Enterprises – Ginnie Mae is not the issuer of the pools it guarantees, and does not utilize its own balance sheet to manage delinquencies (in the normal course). The buyout option therefore gives an issuer the ability to have some control over its exposure to the scheduled principal and interest pass-through requirement that applies to loans in pools, as well as to Ginnie Mae’s delinquency thresholds, from which Ginnie Mae has also provided relief to issuers as part of our response to the national emergency.

As with refinances, buyouts can cause an economic loss for security holders when mortgage-backed securities trade at premium prices. As a general matter, the risk of such losses is a normal consequence of investing in this asset class. What Ginnie Mae guards against in particular, however, are scenarios where liquidations (and losses) occur as the result of unanticipated events or gaps in government policy – the risk being that a commensurate loss of confidence in the security on the part of investors would translate into lower security prices and ultimately a higher cost for the homeowners the program is intended to serve.

A combination of circumstances arising out of COVID-19 presents a high risk of triggering buyout activity that could undermine the integrity of the MBS program, namely transactions in which resolution of a delinquency is known to come from an agency insurance or guaranty payment that does not require a buyout – but where a buyout is executed anyway solely to allow the issuer to capture premium security pricing.

Ideally, Ginnie Mae would prohibit only those types of buyouts. But in practice, it is impossible to identify those types of buyouts as they happen; buyouts can occur at different times and are driven by a variety of considerations. Care must be taken, in protecting against transactions that could be harmful to the program, to impinge as little as possible on the ability to buy out loans in the manner the program terms are intended to facilitate.

For this reason, Ginnie Mae’s approach to the unique COVID-19 circumstances is to leave the buyout rules unaltered and instead place restrictions on the ability to re-pool certain re-performing mortgages previously bought out of pools. This should lessen the economic incentives to strategically buy out loans in a way that may be harmful to the integrity of the MBS program (as more fully detailed in APM 20-07), while still maintaining an avenue to redeliver loans into securities guaranteed by Ginnie Mae.

While we recognize that this approach may not be fully satisfactory to any of the constituencies that are affected by buyout and re-pooling transactions, we believe that it represents a reasonable and appropriate balancing of the interests at stake and maintains the focus appropriately on the loss mitigation activities that will help affected homeowners.

ticker board
by Ginnie Mae | 6/26/2020

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Integer nec odio. Praesent libero. Sed cursus ante dapibus diam. Sed nisi. Nulla quis sem at nibh elementum imperdiet. Duis sagittis ipsum. Praesent mauris. Fusce nec tellus sed augue semper porta. Mauris massa. Vestibulum lacinia arcu eget nulla. Class aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos. 


Curabitur sodales ligula in libero. Sed dignissim lacinia nunc. Curabitur tortor. Pellentesque nibh. Aenean quam. In scelerisque sem at dolor. Maecenas mattis. Sed convallis tristique sem. Proin ut ligula vel nunc egestas porttitor. Morbi lectus risus, iaculis vel, suscipit quis, luctus non, massa. Fusce ac turpis quis ligula lacinia aliquet. Mauris ipsum. Nulla metus metus, ullamcorper vel, tincidunt sed, euismod in, nibh. Quisque volutpat condimentum velit. 



flag over porch
by Ginnie Mae | 6/25/2020

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Integer nec odio. Praesent libero. Sed cursus ante dapibus diam. Sed nisi. Nulla quis sem at nibh elementum imperdiet. Duis sagittis ipsum. Praesent mauris. Fusce nec tellus sed augue semper porta. Mauris massa. Vestibulum lacinia arcu eget nulla. Class aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos. 


Curabitur sodales ligula in libero. Sed dignissim lacinia nunc. Curabitur tortor. Pellentesque nibh. Aenean quam. In scelerisque sem at dolor. Maecenas mattis. Sed convallis tristique sem. Proin ut ligula vel nunc egestas porttitor. Morbi lectus risus, iaculis vel, suscipit quis, luctus non, massa. Fusce ac turpis quis ligula lacinia aliquet. Mauris ipsum. Nulla metus metus, ullamcorper vel, tincidunt sed, euismod in, nibh. Quisque volutpat condimentum velit. ​

gm_ginniegrowth
by Ginnie Mae | 6/25/2020

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Integer nec odio. Praesent libero. Sed cursus ante dapibus diam. Sed nisi. Nulla quis sem at nibh elementum imperdiet. Duis sagittis ipsum. Praesent mauris. Fusce nec tellus sed augue semper porta. Mauris massa. Vestibulum lacinia arcu eget nulla. Class aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos. 


Curabitur sodales ligula in libero. Sed dignissim lacinia nunc. Curabitur tortor. Pellentesque nibh. Aenean quam. In scelerisque sem at dolor. Maecenas mattis. Sed convallis tristique sem. Proin ut ligula vel nunc egestas porttitor. Morbi lectus risus, iaculis vel, suscipit quis, luctus non, massa. Fusce ac turpis quis ligula lacinia aliquet. Mauris ipsum. Nulla metus metus, ullamcorper vel, tincidunt sed, euismod in, nibh. Quisque volutpat condimentum velit. ​

neighboorhood street with flag
by Alven Lam | 6/22/2020

At Ginnie Mae we are committed to our mission of bringing global capital into the American housing finance system. The mobilization of investment into Ginnie Mae mortgage-backed securities (MBS), from capital markets throughout the world, ensures borrowers from different walks of life—including first-time home buyers, lower-income home buyers, veterans or those living in rural areas—can access affordable housing finance, even in the worst of times. The insurance and guarantees placed on the loans in Ginnie Mae securities attract investors concerned about credit risk with other fixed income products.

The full faith and credit guaranty of the United States government on Ginnie Mae MBS and multiclass securities is another reason that our products are attractive to investors. The Ginnie Mae guaranty gives confidence to our security holders, this explicit pledge makes Ginnie Mae MBS products unique and valuable investment vehicles. The guaranty means investors receive scheduled principal and interest (P&I) payments regardless of the circumstance.

During the worst economic conditions and disasters, investors in Ginnie Mae MBS have received their P&I payments on time without disruption to their scheduled delivery. The ongoing COVID-19 pandemic is no exception. The coronavirus emergency is one of many examples in our 50 plus years where Ginnie Mae provides liquidity and stability into the U.S. housing finance sector amidst crisis. Despite the hardship experienced here at home and abroad, global investors continue to invest in Ginnie Mae MBS with confidence that all scheduled payments will be made on time and in full.

Declining treasury rates in the broader fixed income space have led to increased demand for Ginnie Mae MBS with comparatively higher yields versus other sovereign debt. Moreover, international demand for Ginnie Mae MBS has been particularly strong for those global investors seeking to place their capital outside of bonds with lower rates in local and regional bond markets. Accordingly, those investors who successfully manage interest rate and prepayment risks can obtain a yield premium over similar duration U.S. treasury notes.

Investment demand for Ginnie Mae MBS hasn’t slowed since the 2008-2009 financial crisis, when production of new securities and associated investor demand for Ginnie Mae MBS grew from $400 billion outstanding to more than $2 trillion in ten years. Most recently, in May 2020, Ginnie Mae MBS production reached $63.44 billion in issuance and $2.149 trillion in total outstanding principal balance. This continued level of investment helped an additional 235,000 borrowers obtain affordable housing credit. Such accomplishments come from the close work of Ginnie Mae stakeholders involved throughout the MBS and multiclass securities programs.

Ginnie Mae collaborates with partners and stakeholders working with market participants to address liquidity concerns and advance payments. The Pass-Through Assistance Program (PTAP), implemented in response to the COVID-19 National Emergency, has minimized disruptions for mortgage servicers during the coronavirus emergency. The PTAP has also mitigated risks for the U.S. taxpayer, another key component of Ginnie Mae’s role as the guarantor of last resort, by helping to prevent disruption to the mortgage servicing market while implementing various policies aimed at helping borrowers experiencing financial distress.

Another key component of Ginnie Mae operations is to engage with global investors. We conduct robust engagements with institutional investors to raise awareness, answer questions and obtain feedback on Ginnie Mae’s securities programs. In these engagements with investors spanning relevant capital markets actors, we share global market analysis insights and trends on U.S. housing finance markets in a variety of media, including: teleconferences, monthly reports and policy updates. These engagements also solicit input and feedback from investors about Ginnie Mae’s programs. As a result, our investor engagements facilitate valuable input on market perspectives that contribute to decision-making as Ginnie Mae consistently strives for the best in the evaluation of the securities programs and their operations.

Our $2.1 trillion portfolio of MBS principal balance outstanding demonstrates the worldwide trust investors and policymakers place in Ginnie Mae and its products. Our staff of about 150 people is highly skilled with deep knowledge and strong ties to the industry. As such, we are committed to the best in both business and government administration. Our longstanding experience and expertise will ensure we continue to channel investment into the U.S. housing finance system and minimize risks for the U.S. taxpayer—no matter the challenge.

View All