A top Administration priority is to shrink federal agencies and reduce the federal workforce. At the same time certain high priority areas, like military personnel, are exempt from reductions and agency heads can create exemptions as necessary.
As the only national association that exclusively represents independent mortgage banks, which originate 83% of all mortgage loans, CHLA would like to make the case why FHA and Ginnie Mae (and RHS and the VA Loan Guaranty Service) should enjoy similar protections from staffing reductions.
What's at stake here?
Ginnie Mae securitizes almost all FHA, VA, and RHS loans, which combined were responsible for 80% of all low down payment mortgage loans to rural home buyers last year. VA loans are the only zero down payment mortgage loan source available for veterans and active military service members.
And FHA is the bedrock for first-time homebuyers, insuring mortgages for families with credit blemishes and low down payment capabilities while at the same time amassing record net worth and reserve levels.
Last year, 83% of FHA purchase money loans were to first time homebuyers – compared to only 50% for the rest of the mortgage market. [see
Let's be clear: CHLA embraces reform of these mortgage agencies. Two and a half years ago, in an op-ed entitled
Our plan calls for: (1) critically needed updates to Information Technology (IT), (2) payscale comparability (FHA lags behind other federal financial agencies in retaining qualified staff), (3) flexible contracting authority, and (4) direct spending authority to respond to emergency needs and risks.
And last May, CHLA released its
So CHLA embraces reform of FHA and Ginnie Mae. At the same time, we believe staffing cuts to these agencies should be undertaken with great care and consideration. In many ways, FHA and Ginnie Mae are unlike most other federal programs that largely focus on competitive grants or mandatory spending.
First, FHA and Ginnie Mae (and RHS and VA) essentially operate sophisticated businesses, requiring high levels of expertise and an ongoing proactive mortgage market presence.
A second key difference: FHA and Ginnie Mae consistently make a profit for federal taxpayers. The
Moreover, federal mortgage agency loan programs (FHA, VA, RHS), as well as Ginnie Mae (which securitizes these mortgages) are backed by the US government, by federal taxpayers. So, if the management and supervisory capability of these programs were to be diminished – if they did not continue to be run expertly and efficiently - we could be exposing federal taxpayers to financial risk.
Another factor that distinguishes these mortgage loan programs is the critical role they play in our economy, providing affordable single family mortgage loans to enable homeownership. This is particularly important at a time of challenging homeownership affordability, with mortgage rates remaining high and housing prices remaining sticky on the high side.
As noted, Ginnie Mae plays a crucial role in securitizing VA single family loans for veterans and active military service members. Ginnie Mae also securitizes loans for Rural Housing Service (RHS) loans for families in America's smaller towns and communities and FHA loans for underserved borrowers.
Ginnie Mae does all this with a relatively small number of around 250 employees. But this small workforce carries out critically important tasks that require significant skills.
In the last 12 months alone, $475 billion in Ginnie Mae securities were issued, accessing national and international investors. A robust Ginnie Mae staffing level is essential to maintaining investor confidence in the smooth and efficient operation of the Ginnie Mae's Mortgage Backed Securities (MBS) market.
Ginnie Mae is also a regulator. It maintains and supervises a roster of 350+ Ginnie Mae issuers. Ginnie Mae issuers are private sector lenders that securitize MBS pools, service the loans, advance funds to Ginnie Mae pools when borrowers miss mortgage payments, and carry out loss mitigation activities for distressed borrowers to keep them in their home and reduce foreclosure loan losses.
If Ginnie Mae's ability to supervise and maintain its large base of issuers were diminished, homebuyers could end up with fewer mortgage choices and our mortgage servicing markets could become more concentrated, at a time when such concentration is already a concern of federal regulators.
Of similar importance is FHA's supervision of its single family loan programs. Last year, FHA insured 767,000 single family forward mortgages, totaling around $230 billion. FHA's existing portfolio for all loans (single and multi-family) totals around $1.5 trillion.
FHA loan programs are highly sophisticated and market driven. A sufficient number of qualified FHA staff are essential to, among other functions: (1) monitor program risks, (2) make necessary underwriting changes to the program, (3) operate specialty loan programs like rental housing, HECM reverse mortgages, 203(k) rehab, and manufactured home loans, and (4) manage loss mitigation programs that keep families in their homes and reduce foreclosure losses.
In conclusion, there is growing consensus to reform FHA and Ginnie Mae. All we ask is for this to be done in a balanced manner, which both streamlines operation of these programs and maintains their critical role in making homeownership a reality for millions of American families.
