Sunset Seminar
US Government Mortgage Programs:
Balancing Risk and Mission
July 14, 2015
The “New Normal” at Ginnie Mae
John Getchis
Senior Vice President, Office of Capital Markets
Urban Institute – Sunset Seminar VI
July 14, 2015
Trillions of U.S. Dollars
Ginnie Mae's Historic Growth
$1.8
1968 - 2014
2013-2014
Ginnie Mae reaches
$1.5 trillion mark
$1.6
Annual MBS Outstanding
$1.4
2009-2010
Ginnie Mae reaches
$1 trillion mark
$1.2
$1.0
$0.8
1996-1997
Ginnie Mae reaches
$500 billion mark
$0.6
$0.4
$0.2
$0.0
Source: Office of Capital Markets
2
Ginnie Mae MBS Outstanding Volume Continues to Grow
$3,000
AGENCY MBS OUTSTANDING IN BILLIONS*
$2,500
March 2015: $2,803B
$2,000
Fannie Mae
March 2015: $1,663B
Freddie Mac
$1,500
Ginnie Mae
April 2015: $1,543B
$1,000
$500
$0
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Sources: Fannie Mae and Freddie Mac monthly reports; Ginnie Mae data includes HECMs
*Data for Fannie and Freddie are available up to March 2015. Data for Ginnie Mae is available up to April 2015
3
Transition to Non-Depository Issuers of Ginnie Mae Securities
Depositories
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
82%
78%
18%
22%
2010
2011
*Data is Year-to-Date as of April, 2015
Non-Depositories
68%
32%
2012
59%
41%
2013
45%
55%
2014
36%
64%
2015*
4
New Entrants Reducing Concentration, Systemic Risk for
Ginnie Mae
Top Issuers of Single Family MBS
in FY 2011
Rank
Issuer Name
% of Total
Top Issuers of Single Family MBS
in FY 2015 YTD*
Rank
Issuer Name
% of Total
1
WELLS FARGO BANK, NA
34%
1
WELLS FARGO BANK, NA
2
BANK OF AMERICA
26%
2
FREEDOM MORTGAGE CORP
7%
3
JP MORGAN CHASE BANK
8%
3
PENNYMAC LOAN SERVICES
6%
4
PHH MORTGAGE CORP
4%
4
QUICKEN LOANS INC
6%
5
U.S. BANK
4%
5
U.S. BANK
4%
Total Top 5 Issuers
Total Issuance FY2011
76%
$322.3 billion
Total Top 5 Issuers
Total Issuance FY2015 YTD*
Red = Issuers that have fallen out of Top 5 since 2011
Blue = Issuers that have risen into Top 5 since 2011
*Data is Year-to-Date as of April, 2015
16%
39%
$130.9 billion
Non-Depository Servicers Continue to Grow
Depositories
$800
$994
$930
$1,000
Non-Depositories
$920
$878
$795
$600
$184
$206
$245
Sept. 2010
Sept. 2011
Sept. 2012
$200
$576
$513
$415
$400
$828
$-
Sept. 2010
Sept. 2013
Sept. 2014
Sept. 2014
19%
Apr. 2015
41%
37%
81%
Apr. 2015
63%
59%
6
Bulk Transfers and Concurrent Servicing Transfers:
Update on These MSR Growth Mechanisms
Last year, servicing transfers were down from the high levels of 2013.
In 2015, we are seeing more activity both in bulk transfers, almost entirely
to independent issuers, and in concurrent servicing transfers, which are
entirely going to independent issuers.
IN MILLIONS; YTD AS OF APRIL 2015
Bulk
PIIT
Total
FY2011
$10,785
$1,160
$11,945
FY2012
$25,394
$810
$26,204
FY2013
$152,220
$1,206
$153,426
FY2014
$66,066
$7,856
$73,922
FY2015YTD
$51,407
$11,685
$63,092
7
Billions
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
8
Apr-15
Feb-15
Dec-14
Oct-14
Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Purchase
Dec-12
Apr-15
Feb-15
Dec-14
$25
Oct-14
Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Fannie Mae
Billions
$70
$60
$50
$40
$30
$20
$10
$0
Dec-12
Billions
Comparing Purchase and Refinance Issuance Dollars
Ginnie Mae
Refinance
$20
$15
$10
$5
$0
Freddie Mac
Issue Amount for Insuring Agencies of Ginnie Mae Securities
CONSTITUENT FIXED RATE ISSUE AMOUNT
May 2011 - April 2015
$25,000,000,000
FHA
PIH
$20,000,000,000
RHS
$15,000,000,000
$10,000,000,000
$5,000,000,000
May-15
Mar-15
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
$0
May-11
ISSUE AMOUNT
VA
9
Issuer Concentration in Ginnie Mae Multiple Issuer Pools
Top Issuers of G2SF 5.0 MIP
in April 2010
Top Issuers of G2SF 3.5 MIP
in April 2015
Rank
Issuer Name
%
Rank
Issuer Name
%
#1
Wells Fargo Bank
33.40%
#1
Wells Fargo Bank
10.53%
#2
Bank of America
31.55%
#2
DBA Freedom
7.95%
#3
J.P. Morgan Chase Bank
12.77%
#3
PennyMac Loans
7.30%
#4
U.S. Bank
3.36%
#4
Quicken Loan Inc.
6.57%
#5
Nationstar
3.01 %
#5
Pingora Loan Servicing
4.84%
Total Top 5 Issuers
84.09%
Total Top 5 Issuers
37.19%
Other Issuers
7.81%
Other Issuers
24.57%
*Data is Year-to-Date as of April, 2015
10
Ginnie Mae is Prominent in 30 Year Fixed Rate
MBS Gross Issuance Value
30-Year & 20-Year Fixed Rate Single-Family MBS Volume share*
Ginnie Mae
$90
$80
Fannie Mae
$70
Freddie Mac
$60
$50
$40
$30
$20
$10
May-15
Mar-15
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Issue
($ Billions)
Jul-10
$-
*30-Year and 20-Year MBS products include:
Fannie Mae: FNM30, FNM30HILTV, FNM30JM, FNM30INITIO, FNM30RELO, FNM30FHA, FNM30PPAYP, FNM20, FNM20HILTV
Freddie Mac: FHL30CONV, FHL30RELO, FHLG30INIOJM, FHL30FHA, FHL30, FHLG30MOD, FHLG30FHA, FHLG30RELO,
FHLG30PPAYP, FHLG30INITIO, FHLG30HILTV, FHLG30JM, FHLG30, FHLG20, FHLG20JM, FHL20HILTV, FHL20INITIO
Ginnie Mae: GNMII30M, GNM30, GNMII30C, GNMII30MJM, GNMIIBD, GNMIIFHASEC, GNMBD, GNM20, GNMII20M, GNMII20C
11
Ginnie Mae is Prominent in Structured Securities [REMICs]
YTD 2015
Collateral Source
Freddie Mac
Fannie Mae
Ginnie Mae
Total Issue Volume
Issue $
31
27
29
87
Volume
Share
36%
31%
33%
100%
Dollars in Billions
2014
Issue $
77
46
72
195
Volume
Share
39%
24%
37%
100%
2013
Issue $
76
106
82
264
Volume
Share
29%
40%
31%
100%
12
Critical Operating Principles
• Alignment of interest: issuer → credit risk insurer → Ginnie Mae
• Functioning TBA Market
• Transparency: constantly improving disclosure with securities &loans
• Combination provides:
• comfort to value securities
• scale for liquidity to attract capital globally
13
Government Lending Programs: Balancing
Risk and Mission
Laurie Goodman
Director, Housing Finance Policy Center
Urban Institute
CoreLogic and Urban Institute Sunset Seminar
July 14, 2015
Washington, DC
Balancing risk and mission
• Mission
• Countercyclical Policy
• Lending to first time and minority homebuyers (FHA), Lending to Veterans’
(VA)
• Profitability Objective
• MMI fund in the case of FHA
• Veteran’s benefit in the case of VA
15
First Lien Origination Share
(Share, percent)
100%
90%
28.3%
80%
1.24%
70%
20.5%
60%
Bank portfolio
50%
PLS securitization
FHA/VA securitization
40%
GSE securitization
30%
49.9%
20%
10%
0%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Q1
Sources: Inside Mortgage Finance and Urban Institute.
16
The MMI Fund
•
•
•
•
•
2014 report was less favorable than the 2013 report: fund will reach the 2 percent required minimum
ratio in 2016, rather than 2015
The 50 bps cut may push this out somewhat further, but there is little urgency as long as the program is
adding to the fund
Should the fund overcharge new borrowers to make up for undercharging earlier vintages?
FHA premiums, now at 1.75% upfront and 85 bps per annum, had a similar upfront charge and an
annual charge of 50-55 bps per annum until 2010
Role of reverse mortgage (HECM) book of business in MMI fund performance
• HECM was primary driver of poor performance of the fund in FY 2014
• Not included in MMI Fund calculations until 2009
• Highly sensitive to interest rates, similar to a long zero coupon bond. Rates are set in November
for the fiscal year to end the following September. These fluctuations should not be the basis for
policy decisions.
10- and 30-year constant maturity interest rate s (monthly average)
10-year
30-year
November 2012
1.65%
2.80%
November 2013
2.72%
3.80%
November 2014
2.36%
3.04%
June 2015
2.36%
2.96%
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FHA Mutual Insurance Fund Summary by Fiscal Year
2012
2013
2014
2015
2016
2017
2018
-1.4
-0.1
0.4
1.3
2.0
2.7
3.5
2013 report
-0.1
1.2
2.1
3.0
3.9
4.9
MMI fund net worth ($ billions)
2014 report
-16.3
2013 report
-1.3
-1.3
4.8
15.4
15.1
27.3
23.4
39.4
32.6
53.2
43.7
68.5
-7.9
-7.9
5.9
7.8
16.2
18.7
24.2
29.7
33.0
42.3
43.7
56.0
6.5
6.5
-1.2
7.5
-1.0
8.6
-0.8
9.6
-0.4
10.9
-0.1
12.3
Capital ratio (%)
2014 report
Forward net worth ($ billions)
2014 report
2013 report
-13.5
HECM net worth ($billions)
2014 report
-2.8
2013 report
Source: Actuarial review of the FHA MMI Fund, FY 2013 and FY 2014.
Notes: The 2013 HECM includes a $4 billion transfer of capital from the forward fund and a $1.7 billion mandatory
appropriation. The actuarial economic value is $0.8 billion. Interest rate changes account for $5.8 billion of the 2014 HECM
change.
18
Lifetime Economic Value of the FHA MMI Fund
Fiscal years
Lifetime value
($ billions)
1992–2000
8
2001–06
-13
2007–09
-27
2010–13
34
2014
11
1991–2014
13
Source: Summary of FY2014 FHA Annual Report to Congress on the financial Health of the Mutual
Mortgage Insurance Fund, HUD, Nov. 17, 2014
19
HFPC Credit Availability Index shows credit is very tight
Default rate
18%
16%
14%
Product risk
12%
10%
8%
6%
Total without risky products
4%
2%
0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Sources: CoreLogic, HMDA and Urban Institute calculations.
20
The HFPC Credit Availability Index by Channel
• Government risk increased 12.5 percent from Q3 2013 (9.6%) to Q1 2015 (10.8%)
• GSE risk over same period increased 16.7 percent (1.8% to 2.1%)
GSE
Government
Default rate
Default rate
25%
10%
Product risk
8%
20%
Product risk
15%
6%
10%
4%
Total without risky products
2%
5%
Total without risky products
21
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
Sources: CoreLogic, HMDA and Urban Institute calculations.
1998
0%
0%
FHA and GSE market share for three major lenders
Wells Fargo
JP Morgan Chase
Bank of America
40
40
40
35
35
35
30
30
30
25
25
25
20
20
20
15
15
15
10
10
10
5
5
5
0
2011 2012 2013 2014 2015
0
2011 2012 2013 2014 2015
0
2011
FHA
GSE
2012
2013
2014
Source: Urban Institute calculations from eMBS data.
22
2015
Top Issuers' Market Share by Loan Amount
FHA
top 5
top 10
top 25
GSE
25th issuer top 5
top 10
top 25
25th issuer
2011
71.9
83.4
93.4
0.3
60.9
73.6
83.5
0.3
2012
63.9
74.0
87.2
0.6
46.4
59.0
70.7
0.5
2013
53.1
66.3
82.3
0.6
42.3
53.5
67.7
0.5
2014
40.1
55.8
75.1
0.9
32.6
44.7
61.6
0.7
2015 Q1
37.6
50.6
73.8
1.1
32.4
43.2
60.5
0.7
Sources: Inside Mortgage Finance and Urban Institute calculations from eMBS data.
23
FHA and VA Default Rates through Time
40%
35%
30%
25%
FHA, Count Weighted
20%
FHA, Balance Weighted
VA, Count Weighted
15%
VA, Balance Weighted
10%
5%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: CoreLogic Servicing data and Urban Institute calculations.
Note: Default is defined as ever D90+.
24