Non-Depositories Source of Concern for Ginnie Mae

Frank Polich/Bloomberg

The shift in the composition of Ginnie Mae-approved mortgage-backed securities issuers from mostly banks to an even split between banks and non-depositories has created some concerns for the agency.

But the payoff is an increase in credit availability for consumers, the head of the agency said.

Just four years ago, 82% of the Ginnie Mae MBS issuance came from banks; in the most recent federal fiscal year, it was split almost 50-50 between banks and non-depositories, said its president Ted Tozer.

"It is a new position for us having to deal with non-depositories," Tozer told the Mortgage Bankers Association annual convention in Las Vegas on Monday. If a loan goes bad, banks have the liquidity to make the principal and interest payments on the MBS. Ginnie Mae is concerned regarding the non-depositories ability to do the same.

That is why the agency is instituting liquidity requirements for issuers that are tied to the size of their Ginnie Mae servicing portfolios.

Approving more non-depositories, even with possibility of increased risk for Ginnie Mae, is a good thing, Tozer explained. If Ginnie Mae hadn't approved non-depositories, one-third of consumer's access to mortgage credit would have disappeared, he said.

Ginnie Mae also is instituting a loss scorecard covering operational risk and the handling of defaulted loans. Newly approved issuers must do a securitization within 18 months of approval or it will be revoked.

The Ginnie plan to allow the Federal Home Loan Banks to become issuers also is designed to increase access to credit. It will push the credit decision to mortgage originators who are not issuers and away from the aggregators who are putting overlays on the loans they purchase to be securitized. It will allow mortgage bankers to control their own destiny, Tozer said.

Access to credit was the overriding issue that the panel of government agency representatives addressed. The Federal Housing Administration program is designed to work with private capital to give families equal access to the financing markets while at the same time allowing those entities to make a profit, noted Binian Gebre, who will soon take over as the acting FHA commissioner when Carol Galante steps down.

The FHA model has worked for 80 years, but when originator profitability suffers, it hurts the program, he said. Right now FHA is focused on balancing what is right for consumers with what makes the program attractive for lenders, Gebre said.

He would not otherwise directly address later questions on whether the FHA would be willing to revise a fee structure lenders find is limiting access to the program.

The panel did address reports that millennials are delaying homeownership.

The Veterans Affairs guarantee program has seen an 11% increase in purchase loan volume on a year-over-year basis and 30% of its purchase loans are made to millennials taking advantage of the affordability of the program, including its no-down-payment option, said Jeffrey London, its deputy director of Loan Guarantee Service.

It is "a bunch of nonsense" that millennials are not interested in homeownership, Gebre added. Renting is becoming less affordable for consumers, but many of those same consumers believe they cannot qualify for a mortgage.

To counter that perception, the mortgage industry needs to help educate people about how they can qualify for a loan, Tozer said.

Home Mortgage Disclosure Act numbers over an extended period show a low percentage of minorities receiving mortgages, according to Maurice Jourdain-Earl, an affordable housing activist and founder of ComplianceTech. This will continue until companies begin to diversify their workforce, he said.