With No Long-Term Solution in Sight, GSEs Focus on Short-Term
NASHVILLE–MBA President and CEO David Stevens, CMB, said GSE reform, which has stalled in Congress for the past several years, will emerge as a key issue in following the 2016 elections.
“This is going to be the policy issue that we have to deal with in the next presidential term,” Stevens said here at the Mortgage Bankers Association’s Independent Mortgage Bankers Conference. “As long as Fannie Mae and Freddie Mac remain in conservatorship, there is no way for them to go. These institutions are too important to the industry; they are too important to us; and it is going to require action going forward. We have to make sure that we are vigilant in educating legislators and regulators so that we reach a solution that is good for everyone.”
In the meantime, representatives of the GSEs, as well as HUD and Ginnie Mae, said shorter-term issues need to be addressed–such as addressing future home buyer needs and working with independent mortgage bankers.
“Capital is tight and markets are being squeezed,” said Chris Boyle, senior vice president of single-family sales and relationship management with Freddie Mac, McLean, Va. “We’re working to create certainty and clarity for our customers.”
Boyle said the GSEs will have to adapt to changing home buyer sentiment.
“There is a lot of work to be done,” Boyle said. “I’m not sure anyone is satisfied that enough has been done. Product development is important–we have to think about forms of credit and different ways of offering credit so that we can accommodate new generations of home buyers.” She said attracting new home buyers is “going to be all about getting in the trenches and working with these future home buyers in addressing their needs…it’s not a one-time product; it’s a long journey.”
Zach Oppenheimer, senior vice president and head of customer engagement with Fannie Mae, Washington, D.C., said over the next 10 years, the majority of household formation will be driven by minorities.
“They have a very high level of aspiration to move into homeownership, but not on the same timetable of the Baby Boomers or other previous generations,” Oppenheimer said. “At the same time, in our surveys of homeowners, there is a lack of consumer information about the homeownership process. We are offering materials to our customers to help future homeowners understand the homeownership process better and the types of mortgage products and services available…to be successful with this demographic, we have to commit more resources.”
Edward Golding, principal deputy assistant secretary with HUD responsible for FHA, said a recent actuarial report showing that FHA’s capital reserve ratio for its Mutual Mortgage Insurance fund moved back above the 2 percent congressional mandate “bodes well for FHA and its customers.”
Golding said the threshold was reached despite a cut earlier this year in MMI premiums. “What we lost in margin we made up for in expanded volume,” he said, noting that further reductions are not currently on the table. “If we were to contemplate more cuts, you’d see lower Ginnie Mae margins,” he said.
Michael Drayne, senior vice president of Ginnie Mae’s issuer and portfolio management, noted the number of Ginnie Mae issuers has increased substantially since the financial crisis, as well as the range of issuers. “A lot of the work we’re going to have to do over the next few years has much to do with the changing nature of what our customers are working with,” he said.
Drayne said nuances exist in Ginnie Mae servicing that distinguish it from Fannie Mae/Freddie Mac servicing. “Freddie Mac and Fannie Mae are the individual issuers of their securities; Ginnie Mae is only the guarantor of our members’ securities,” he said. “The Ginnie Mae issuer has a much more imposing set of responsibilities, which is one of the reason why there are fewer Ginnie Mae issuers…what we can do to improve issuer liquidity is an important issue for us in the future.”
