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MISMO Fall Summit Keynote

MISMO Fall Summit Keynote. Ted Tozer September 24, 2013. Overview. U.S. Government-owned corporation within HUD Guarantee Mortgage-Backed Securities (MBS), which raise funding for virtually all loans insured or guaranteed by U.S. Government agencies (FHA , VA, USDA Rural Housing)

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MISMO Fall Summit Keynote

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  1. MISMO Fall Summit Keynote Ted Tozer September 24, 2013

  2. Overview • U.S. Government-owned corporation within HUD • Guarantee Mortgage-Backed Securities (MBS), which raise funding for virtually all loans insured or guaranteed by U.S. Government agencies (FHA, VA, USDA Rural Housing) • Ginnie Mae does not originate loans or issue MBS • Facilitate financing of diverse products: • Single-family: forward & reverse mortgages, manufactured homes • Multifamily: construction & permanent loans, hospitals, nursing homes, assisted living facilities • Outstanding MBS guaranteed volume of over $1.4 trillion • Monthly issuance of $30 - 40 billion • Over 400 approved Issuers in program

  3. Net Monthly Supply (in millions) Average over May – July 2013

  4. Ginnie Mae MBS Outstanding Relative to Fannie & Freddie MBS outstanding in billions Jul 2013: $2,770B Jul 2013: $1,610B Jul 2013: $1,431B Sources: Fannie Mae and Freddie Mac Monthly Reports; Ginnie Mae data includes HECMs

  5. In the Fourth Loss Position Ginnie Mae Last Dollar Loss Corporate Resources of Issuer/ Servicer $ Government Agency Credit Enhancement* LOSSES Homeowner Equity First Dollar Loss Relative Loss Position *VA covers the first 25% of credit loss, USDA-RHS covers the first 90%, and FHA covers 100%. Coverage of foreclosure expenses vary by agency; uncovered expenses can be substantial.

  6. Loss Models Comparison Ginnie Mae Fannie/Freddie with Risk-share GinnieMae Last Dollar Loss Last Dollar Loss Fannie/ Freddie Corporate Resources of Issuer/ Servicer Government Agency Credit Enhancement* LOSSES LOSSES $ $ Private Credit Enhancement*** Private Mortgage Insurance** Homeowner Equity Homeowner Equity First Dollar Loss First Dollar Loss Relative Loss Position Relative Loss Position *VA covers the first 25% of credit loss, USDA-RHS covers the first 90%, and FHA covers 100%. Coverage of foreclosure expenses vary by agency; uncovered expenses can be substantial. **Private Mortgage Insurance (PMI) is only required for loans with > 80% LTV; loans with ≤ 80% LTV have no PMI. ***Private Credit Enhancement is the result of a recent FHFA mandate on Fannie & Freddie requiring they establish risk-share instruments with private enterprises or investors.

  7. Ginnie Mae Compared to the GSEs

  8. Value of the Government Guaranty & TBA Market • Essential to preserving an affordable & widely available 30-year fixed-rate mortgage • Makes mortgages eligible for the To-Be-Announced (TBA) market • TBA market exclusively made up of government-guaranteed MBS (Ginnie Mae, Fannie Mae & Freddie Mac) • TBA market enables borrowers to lock-in an interest rate prior to loan closing • Assures investors they will get paid regardless of loan or issuer/servicer performance, effectively homogenizing MBS pools • Homogenization enables investment in enormous blocks of mortgages • $265 billion in daily TBA MBS trading in 2012; $67 trillion in all of 2012 • Attracts capital from throughout the world to invest in U.S. mortgages • Makes investment in U.S. mortgages exceptionally safe & provides liquidity to them

  9. Government Support of Mortgages • The U.S. Government has had a significant role in the mortgage market going back at least 30 years Source: Federal Reserve Board

  10. Housing Finance Reform Overview • Among the proposals, the Bipartisan Policy Center’s (BPC) Housing Commission white paper has served as a catalyst for serious discussion on Capitol Hill; the Corker-Warner bill is the first attempt at serious bipartisan legislation • An effective housing finance model will require: • Broad access to global capital • Alignment of interests from issuers to insurers to investors • Robust disclosure of underlying assets • Sufficient scale to attract wide participation • Well-functioning TBA market

  11. Ginnie Mae’s Modernization Initiatives • Modernized securitization platform for loan pooling, securities issuance, data validation, and disclosures distribution • Platform manages 9 million loans in portfolio and guarantees 3,000 MBS pools backed by 180,000 - 200,000 loans a month • Publication of loan-level data disclosures by year end 2013 • Daily issuance data released August 2013 • Monthly summary data release target, 4Q2013 • MISMO compliant at-issuance file • Technical specifications and implementation timeframe to be published after the official release of MISMO v3.3 (expected release Jan. 2014)

  12. Overall Commitment to MISMO Ginnie Mae continues to demonstrate its full commitment to the adoption and implementation of the MISMO standard industry-wide: • Participant in MISMO’s Secondary Workgroup • Participant in MISMO’s Government Forum • Member of MISMO’s Software Designation Program Advisory Team • Regular presenter at MISMO and MBA conferences • Contributor to the MISMO Implementation Framework

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