A Public-Private Partnership to
Expand Home Ownership
Briefing Packet
What is Ginnie Mae
• Ginnie Mae (GNMA) is the Gov’t Nat’l
Mortgage Association, part of HUD
• GNMA provides a guarantee to
investors who purchase FHA and VA
home loans bundled into securities
• These securities are sold to investors
and backed by the full faith and credit of
the U.S. government
Overview
Ginnie Mae Public-Private Partnership
• Expands home ownership to those with
difficulty obtaining loans: minorities, lowmoderate income, first time buyers
• Provides consumers more choice with
increased price advantages and
innovations
• Spreads some risk of default to private
sector, benefiting taxpayers
How It Works
• Currently, GNMA securtized-home loans are
insured only by government agencies (FHA
and VA)
• New program allows the private sector to
insure GNMA loans
• Private insurance results in reduced risk to
taxpayers
• Reduced taxpayer risk = more capital
available to insure home mortgages = more
home owners
Complements FHA Program
• New program expands opportunities for home
loans
• Currently, more than half of all FHA loans go
to buyers with down payments of 3% or less
• New program strengthens GNMA by focusing
on 3%-10% down payment range
• This allows GNMA to securitize more loans in
that 3-10% range, resulting in more loan
opportunities
Consumer Benefits
• More affordable housing opportunities
– More choices for home-buyers
– Competition gives consumers price
advantage
– Lenders have better ability to target underserved populations
Consumer Benefits
• More automated loan-approval systems
for consumer loan approval
– Currently lenders can only use two
automated loan-approval systems for
consumers seeking mortgages
– New program gives lenders more choices,
meaning greater opportunities for
consumer loan approval (1/3 currently
rejected would be approved)
Taxpayer Benefits
• Losses from default spread between
government AND private insurers
(currently all losses borne by taxpayers)
• New program employs private sector
methods for mitigating persons’ financial
problems
– Keeps more homeowners in homes
– Keeps more homes occupied,
neighborhoods safer
Government Benefits
• Stronger Ginnie Mae
– Compliments FHA, VA
– Broader geographic/demographic
dispersion of loans (more low-income and
minority loans)
– Strengthens GNMA mission - more people
with homes, especially underserved
populations
Lender Benefits
•
•
•
•
•
Increased size of market
More loan approvals
Fewer loan defaults
Deeper insurance coverage
Greater control over underwriting decisions
Home buyer
•Greater opportunity
for loan approval
• Lower costs
• M.I. cancellation
• More choices
Lender / Servicer
• Deeper M.I. Coverage
• More loan approvals
• More money to make loans
• Fewer defaults
More homeowners
GNMA
• Guarantee more loans
• Utilize innovations of
private sector
Taxpayers
• More income to U.S.
Treasury
• Spread risk from default
Private MIs Absorb Risk
Amount
<$50K
$50K-100K
$100K-150K
>$150K-GSE Limit
LTV
Basic
Coverage
Sup.
Coverage
Total MI
Coverage
VA
97%
>95%
90%
97%
>95%
90%
97%
>95%
90%
97%
35%
30%
25%
35%
30%
25%
35%
30%
25%
35%
15%
15%
10%
10%
5%
5%
5%
5%
5%
---
50%
45%
35%
45%
35%
30%
40%
35%
30%
35%
50-45%
>95%
30%
---
30%
90%
25%
---
25%
45-36%
36-25%
25-21%