A Public-Private Partnership to Expand Home Ownership Briefing Packet

What is Ginnie Mae Ginnie Mae (GNMA) is the Gov’t Nat’l Mortgage Association, part of HUD GNMA provides a guarantee to investors who purchase FHA and VA home loans bundled into securities These securities are sold to investors and backed by the full faith and credit of the U.S. government

Overview Ginnie Mae Public-Private Partnership Expands home ownership to those with difficulty obtaining loans: minorities, low- moderate income, first time buyers Provides consumers more choice with increased price advantages and innovations Spreads some risk of default to private sector, benefiting taxpayers

How It Works Currently, GNMA securtized-home loans are insured only by government agencies (FHA and VA) New program allows the private sector to insure GNMA loans Private insurance results in reduced risk to taxpayers Reduced taxpayer risk = more capital available to insure home mortgages = more home owners

Complements FHA Program New program expands opportunities for home loans Currently, more than half of all FHA loans go to buyers with down payments of 3% or less New program strengthens GNMA by focusing on 3%-10% down payment range This allows GNMA to securitize more loans in that 3-10% range, resulting in more loan opportunities

Consumer Benefits More affordable housing opportunities –More choices for home-buyers –Competition gives consumers price advantage –Lenders have better ability to target under- served populations

Consumer Benefits More automated loan-approval systems for consumer loan approval –Currently lenders can only use two automated loan-approval systems for consumers seeking mortgages –New program gives lenders more choices, meaning greater opportunities for consumer loan approval (1/3 currently rejected would be approved)

Taxpayer Benefits Losses from default spread between government AND private insurers (currently all losses borne by taxpayers) New program employs private sector methods for mitigating persons’ financial problems –Keeps more homeowners in homes –Keeps more homes occupied, neighborhoods safer

Government Benefits Stronger Ginnie Mae –Compliments FHA, VA –Broader geographic/demographic dispersion of loans (more low-income and minority loans) –Strengthens GNMA mission - more people with homes, especially underserved populations

Lender Benefits Increased size of market More loan approvals Fewer loan defaults Deeper insurance coverage Greater control over underwriting decisions

Home buyer Greater opportunity for loan approval Lower costs M.I. cancellation More choices Lender / Servicer Deeper M.I. Coverage More loan approvals More money to make loans Fewer defaults GNMA Guarantee more loans Utilize innovations of private sector Taxpayers More income to U.S. Treasury Spread risk from default More homeowners

Private MIs Absorb Risk