Ginnie Mae Publishes 2020 Progress Update
Ginnie Mae, Washington, D.C. yesterday released a progress update to its Ginnie Mae 2020 white paper, detailing strides the agency has made toward modernizing its mortgage-backed securities platform, enhancing counterparty risk management and fostering improvements to its program.
“At $2.1 trillion in size and growing, the Ginnie Mae MBS portfolio is an integral component of the U.S. mortgage finance system,” said Ginnie Mae Acting President Maren Kasper. “Ginnie Mae continues to demonstrate its capacity to effectively operate and maintain a state-of-the-art technology platform and counterparty risk framework, keeping pace with innovation and evolution in the mortgage finance system. This allows us to fulfill our mission by facilitating liquidity in the American housing market, ensuring the health of the Ginnie Mae security and protecting taxpayer interests.”
The report (https://www.ginniemae.gov/newsroom/publications/Documents/ginniemae_2020.pdf) noted the Ginnie Mae II security has evolved into a “highly liquid and well-functioning security;” its technology platform is “state-of-the-art” and continued modernization is a top priority; its securitization platform is “secure and robust,” growing from $500 billion in 2008 to more than $2.1 trillion in 2019, “without market disruption or operational incidents.”
The technological modernization of Ginnie Mae’s securitization platform began nearly 10 years ago; the paper noted the agency’s risk management evolution continues.
“The size of the Ginnie Mae guaranteed mortgage-backed security portfolio and the respective mortgage servicing rights assets owned by an increasingly diverse set of counterparties has a profound impact on how the agency views risk management,” the paper said. “In the past, risk management at Ginnie Mae meant monitoring compliance with a basic, uniform set of program standards. Today however, given Ginnie Mae’s expanded role in the mortgage finance system, risks have been heightened as a result of the sheer size of the program and the evolving nature of the Issuers. Our risk management responsibilities have become much more demanding, which requires Ginnie Mae to continually reexamine and evolve.” The paper said Ginnie Mae is now evaluating risk that takes many more forms, including new business models and transactions, operational risk resulting from networked business constructs, and cyber risk.
The largest initiative in counterparty risk is developing loan-level functionality for the Ginnie Mae platform, noting many of the critical program functions (outside of data disclosures) occur at the level of the pool that is formed at MBS issuance.
“Ginnie Mae’s fundamental view is that permanently accepting the pool-level status quo is unsatisfactory, including with respect to risk management capabilities,” the paper said. “To begin the change-over process, Ginnie Mae is launching an initial planning exercise in 2019 with the goal of scoping out a path and timeline to implement loan-level capabilities. This exercise will take time to develop and implement, given the broad impacts this initiative will have across the entire Ginnie Mae program and organization. We also continue to explore credit risk transfer and the possibility of promoting whole loan asset sales or securitization, as mentioned in ‘Ginnie Mae 2020′ last year.”
