Page 56 - September October 2018 Disruption Report Flip Book

GINNIE MAE
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FHA in the 21st century
The topic has received scant attention in the industry, but boils to the surface every once in a while, including a mention or two by Wall Street researchers at Barclays. The investment bank sees tighter spreads coming if Congress rewrites the GSE charters to provide an explicit government guarantee for their securities.
For bank investors, this would put GSE paper on a level playing field with Ginnie MBS in terms of capital requirements. Banks currently put Fannie/ Freddie MBS in the 20 percent risk-weight category, compared to the zero- weight bucket for Ginnie securities.
Earlier in the year, Barclays analyst Dennis Lee said in a report that if Fannie/ Freddie MBS are “converted,” receiving an explicit backing from the U.S. government, spreads would tighten. Rob Zimmer, director of external affairs for the Community Mortgage Lenders of America, is in the camp of those worrying about the ramifications. (Inside Mortgage Finance, Paul Muolo, 10/30/18)
In a speech at the AEI-CRN conference, FHA Commissioner Brian Montgomery said he is focused was on strengthening three aspects of the FHA—(i) staying true to its core mission of providing affordable housing for first-time low- to middle-income homebuyers and minorities; (ii) strengthening the agency’s capital by “sharing the integrity of our endorsements and attracting the best lender partners”; and (iii) appropriately managing risk for borrowers and partners of the taxpayers whose “hard-earned dollars are at work.”
“We’re not looking at gobbling the market share of the private sector, but we are about affordable housing, we are about access to credit for first-time low- to moderate-income and minority homebuyers and we perform the heroic and counter-cyclical role in times of duress,” said Montgomery.
When Montgomery first joined FHA in 2005, the agency’s portfolio totaled $375 billion. “The
current $1.3 trillion book means that we have a huge fiduciary responsibility to the public,” he said. “Ultimately we must operate programs that are sustainable for borrowers, renters, taxpayers, and all our stakeholders. ...We are seeing things in the book that is giving us pause and we continue
to examine our single-family credit box. We are looking at the risk characteristics of some of the current policies regarding down payment assistance, cash out refinances and DTI ratios. We need to be vigilant about fraud and lending schemes and we cannot allow bad actors to populate our business.” FHA is also moving to streamlining and speed up the payment process for HECMs to put the program on a more financially viable path.”
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