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Ginnie Mae Outstanding MBS Steady at $2T Threshold

Ginnie Mae [1] on Wednesday announced [2] that issuance of its mortgage-backed securities (MBS) totaled $29.930 billion in January. A breakdown of its January issuance includes $28.661 billion of Ginnie Mae II MBS and $1.269 billion of Ginnie Mae I MBS, which includes $1.066 billion of loans for multifamily housing. A total outstanding principal balance of $2.053 trillion is an increase from $1.924 trillion in January 2018.

In its previous report, Ginnie Mae MBS totaled $30.291 billion in December 2018 with the breakdown comprising 28.166 billion of Ginnie Mae II MBS and $2.125 billion of Ginnie Mae I MBS, which includes $1.977 billion of loans for multifamily housing. The past total outstanding principal balance of $2.042 trillion reflected an increase from $1.913 trillion in December 2017.

As reported in an article [3] by The Wall Street Journal in January 2019, Ginnie Mae had expressed concerned about risks from nonbank lenders, whose share of home loans has ballooned since the financial crisis. The agency, for the first time in years, demanded that lenders improve their financial metrics before receiving full approval to continue issuing mortgage bonds backed by them. According to the publication, the agency also conducted stress tests of business partners, to check on their monthly cash-flow obligations under reduced loan production and increased delinquencies.

The article pointed out that thirty-four percent of securities issued by Ginnie Mae were serviced by nonbank lenders in 2014—the share of which has now increased to 61 percent. Two main reasons—a cooling housing market and mortgage refinancing falling to its lowest level in 18 years—have raised concerns about nonbank lenders’ ability to meet their financial obligations. It also noted that a failure on the part of these servicers, and losses thereafter could end up becoming a burden on the taxpayer.

Ginnie Mae I MBS are modified pass-through mortgage-backed securities on which registered holders receive separate principal and interest payments on each of their certificates. These include single-family, multifamily, manufactured home and project construction loans. Ginnie Mae II MBS are modified pass-through mortgage-backed securities for which registered holders receive an aggregate principal and interest payment from a central paying agent.