The future role of the Government National Mortgage Association – also called Ginnie Mae – was examined at a House Housing and Insurance Subcommittee hearing the week.
“It’s important that we understand how Ginnie has been able to manage their growth, which has been significant, and their responsibility to the taxpayer. We also must further explore the Ginnie model more in-depth as we look to reform the housing finance system and bring more private sector skin in the game,” Subcommittee Chairman Sean Duffy (R-WI) said. “As I have said at previous hearings, I think we need to move forward with housing finance reform in a bipartisan manner. I hope today’s hearing will help inform members on both sides of the aisle on what Ginnie’s future role in the housing market could be.”
Ginnie Mae uses the full faith and credit of the U.S. Government to back its mortgage-backed securities (MBS). That means it guarantees investors the timely payment of principal and interest on MBS collateralized by loans guaranteed by the federal government. These loans might include loans from the Federal Housing Administration, Department of Veterans Affairs, Department of Agriculture’s Rural Housing Service, and the Department of Housing and Urban Development’s Office of Public and Indian Housing.
“As Secretary [Ben] Carson said recently in his testimony to this committee, reform to our secondary mortgage market is an important piece of unfinished business from the housing crisis,” Michael Bright, acting president, Government National Mortgage Association. “Reform efforts should be built on shared goals of ensuring a well-functioning housing finance system that provides credit access and reduces overall taxpayer exposure. It is notable that many of the recent housing finance reform proposals include, in some way, an explicit government guaranty as a catastrophic backstop for some portion of the mortgage market.”
Ginnie Mae’s portfolio has grown significantly since it was founded 50 years ago. Some witnesses said reform is needed to ensure equal market access for lenders of all sizes and business models. This would create more competition, which is better for consumers, they said.