1. The Government Guaranty & Ginnie Mae
Ted Tozer
Housing Renaissance
August 3, 2013

2. Value of the Government Guaranty on MBS
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
$280.4 billion in daily TBA MBS trading in 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
Note, mortgage payment is already insured by the Government through FHA, VA, USDA
Although mortgage is insured, claim payment from insurer to Issuer/Servicer can take months, eg, long foreclosure process, & MBS investors expect payment on a monthly basis
MBS guaranty ensures against catastrophic risk that Issuer/Servicer cannot make payment to MBS Investor due to, eg, Issuer/Servicer running out of cash
Since MBS is very safe, many investors want to invest in it & many investors do invest in it
Since there are a lot of buyers & sellers of MBS, it makes it very easy to sell your MBS for the price you would expect -> liquidity
Another example of an exceptionally liquid investment is US Treasuries

3. Government Exposure to Mortgages
U.S. Government has had a significant role in the mortgage market going back at least 30 years

4. Ginnie Mae Share of Agency Purchase Volume
Agency: Ginnie Mae, Fannie Mae & Freddie Mac

5. Government is in the Fourth Loss Position
Relative Loss Position
First Dollar Loss
Last Dollar Loss
LOSSES
Homeowner Equity
Credit Enhancer
Corporate Resources of Issuer/ Servicer
Government Guarantor $

6. Ginnie Mae Transformation Initiative
Securitization Platform Modernization
Important contribution to MISMO initiative of industry standardization of loan data element definitions
Loan-level data disclosure made available 8/2/2013
Enhanced expertise in counterparty risk management
Modernization & possible consolidation of GN I & GN II programs