On Thursday, Ginnie Mae—the government-owned corporation that attracts global capital into the housing finance system—announced that issuance of its mortgage-backed securities (MBS) totaled $36.41 billion in January 2018. This brings Ginnie Mae’s total outstanding principal balance to $1.924 trillion, up from January 2017’s total of $1.786 trillion. Ginnie’s MBS issuance for FY 2018 to the end of January totaled $153.419 billion.
Ginnie's January's issuance included $34.611 billion of Ginnie Mae II MBS and $1.795 billion of Ginnie Mae I MBS. Together, they "provided access to $36.834 billion in capital for single-family home loans and $1.403 billion for multifamily housing."
The Fed is expected to continue working to shrink the agency’s balance sheet, including MBS issued by Fannie Mae, Freddie Mac, and Ginnie Mae. However, some believe even more drastic changes are needed for the GSEs. Ginnie Mae Acting President Michael R. Bright spoke before the House Financial Services Committee in November 2017, during which he discussed a paper he co-wrote with FHFA Acting Director Ed DeMarco in September 2016. It proposed reconstituting Fannie Mae and Freddie Mac as lender-owned mutuals and removing Ginnie Mae from the auspices of the Department of Housing and Urban Development, instead converting Ginnie into a standalone government corporation like the FDIC, “with authority over its own budget, hiring, and compensation.”
However, Bright also had praise for Ginnie. “At a very high level, the Ginnie Mae wrap works because we do two things effectively,” Bright said. “First, we are transparent about our rules and our processes with our investors. And second, we work hard to police our program.”
That second promise came into play last week, when Ginnie Mae notified a small number of issuers in the multi-issuer mortgage-backed security (MBS) pool to take steps to address churning in its MBS program. “Churning” is a process where a lender solicits an existing borrower to refinance their current mortgage for a better offer with a different or the same investor. Some lenders use this practice to refinance a loan multiple times and generate profits for lenders.
“We have an obligation to take necessary measures to prevent the lending practices of a few from impairing the performance of our multi-issuer securities, and thus raising the cost of homeownership for millions of Americans,” said Bright.