Ginnie Mae issuance drops from May but remains near historic highs

Securitized mortgage issuance at government agency Ginnie Mae has given up roughly half its gains since rates fell last year and it hit a nearly $90 billion peak this April, but it is still well above historical levels.

Ginnie’s volume of $72.5 billion in June was down from $77.6 billion in May and up from almost $61.3 billion a year ago, according to a recent press release. Monthly issuance volumes have been in the $75 billion to $80 billion range in 2020 and 2021, compared to $30 billion to $45 billion in 2018 and 2019.

That could factor into discussions around a housing appropriations bill going up for review this week, according to the Mortgage Bankers Association. Ginnie, which serves as the second line of the defense for government guarantees in a market serving low-to-moderate-income borrowers, is known for operating on a tight budget. The MBA wants it better funded due in part to the elevated volumes of loans it is handling.

“It’s one component of the desire to make sure that Ginnie Mae’s fully funded,” Dan Fichtler, associate vice president of housing finance policy at the MBA, said about the volume of new Ginnie securities. “As Ginnie Mae issuance volume grows, it only increases the importance of any technological upgrades it’s considering or pursuing for its platform."

The MBA has written to key congressional committee and subcommittee members, calling on them to provide an increased level of funding for staffing, training, technology and counterparty risk-management needs in the appropriations bill. That bill could have implications for home finance as soon as October given that the Department of Housing and Urban Development’s fiscal year starts then.

While it is plausible that issuance could return to March 2020 levels (approximately $55 billion) by October if it keeps falling at the current rate, historical analysis of the government loan originations feeding Ginnie securities suggest counterparties may be handling high levels of work-intensive purchase mortgages even if broader volumes keep falling.

For example, year-to-date Federal Housing Administration-insured purchase-loan endorsement counts are running at a rate slightly ahead of 2020’s at 321,544 compared to 321,264, an analysis of the latest publicly available data by Polygon Research’s FHAVision software shows. (The FHA has made data through May available so far.)

To be sure, issuance and origination volumes alone are unlikely to determine what Ginnie’s budget will be like. Additionally, the FHA will stop accepting requests for temporary pandemic-related payment suspensions, and foreclosures will restart in upcoming months, which will create more counterparty risk management than usual in the upcoming fiscal year.

While other government agencies, like the FHA, directly insure or guarantee borrowers’ payments on the loans in securitizations, Ginnie also bears counterparty risk because it takes responsibility for ensuring cash-flows from borrowers’ payments are delivered to securities investors. Its main concern is that the mortgage companies it works with have the wherewithal to keep advancing that money.

The rate at which payments on Ginnie loans have been forborne is high relative to mortgages purchased by government-sponsored enterprises Fannie Mae and Freddie Mac because Ginnie borrowers involved typically have lower incomes sensitive to economic stress.

The single-family forbearance rate has been falling across the board, albeit not fast enough to entirely avoid a wave of loan workouts that could strain counterparties later this year. MBA forbearance rates reported Monday compared to the previous week’s were as follows: overall, from 3.87% to 3.86%; Ginnie Mae, from 5.1% to 4.78%; and Fannie/Freddie, from 1.99% to 1.91%.