Can Government Open More Doors

for Borrowers?

NALHFA Annual Conference

Mary K. Kinney, Executive Vice President & Chief Operating Officer

April 30, 2015

In 1968, Congress established the Government National Mortgage

Association, known as “Ginnie Mae.”

Ginnie Mae is a self-sustaining government-owned corporation organized

within HUD. Its President is nominated by the President of the United

States and confirmed by the United States Senate.

Ginnie Mae’s mission is to expand affordable housing in America by linking

global capital markets to the nation's housing finance markets.

Ginnie Mae securities are the only mortgage-backed securities that offer

the full faith and credit guaranty of the United States Government.

Ginnie Mae’s role is to guarantee timely principal and interest payments to

investors, and it charges guaranty fees for this commitment.

About Ginnie Mae

1

Ginnie Mae’s Securitization Platform Continues to Evolve

to Meet the Challenges of a Changing & Growing Market

Ginnie Mae’s increased

relevance is evidenced in its

steady, increased growth and

its share of the secondary

mortgage market.

Ginnie Mae’s average issuance

in last five years is $382 Billion.

2015 YTD August volume now

has Ginnie Mae at about 32%

of total new MBS issue market.

Average MBS Issued Per Month in

FY2014

Current Outstanding Ginnie Mae

Securities

$25

Billion

$1.5

Trillion

Loans Currently Processed 9.1

Million

P & I Paid to Investors Monthly $22

Billion

Active Issuers 344

Guarantors 4

2

$0

$5,000,000,000

$10,000,000,000

$15,000,000,000

$20,000,000,000

$25,000,000,000

Issu

e A

mo

un

t

Constituent Fixed Rate Issue Amount January 2011 - January 2015

FHA

VA

RHS

PIH

Issue Amount for Insuring Agencies of Ginnie Mae

Securities

3

Differences in Ginnie Mae & the GSEs

Ginnie Mae GSEs

Governance Wholly owned Government corporation Under Government conservatorship since September 2008 but remain publicly traded companies (not on NYSE)

Government Guaranty

Explicit guaranty to investors Implicit guaranty to investors “ “too big to fail”

Business Activities

Does not purchase loans, nor does it buy, sell, or issue securities as part of its regular course of business, but approves private lending institutions to issue MBS for which Ginnie Mae provides the guaranty.

Purchases loans; buys, sells, and issues securities.

Rates and Terms Trade at a higher price than comparable GSE MBS, thus providing a lower interest rate to borrowers

Trade at lower prices relative to Ginnie Mae MBS

Functions Guaranty and bond administration of MBS only Loan-level guaranty and bond administration of MBS; and management of investment portfolio of whole loans and MBS

Risk

Limited risk to Ginnie Mae. Issuers/Servicer s retain risk. Issuers must have liquidity and capital to advance payments of principal and interest to investors when a loan defaults. Government agencies insurance (e.g., FHA, VA, RD, PIH) repays Issuers for principal (not Ginnie Mae). Also, Issuers are responsible for unreimbursed credit losses for the securities they issue.

Significant risk to the GSEs. Borrower Credit Risk, Interest Rate Risk, and Servicer Risk. Both guarantee full repayment of principal to investors when a loan defaults. Both GSEs are responsible for the risk of loss on their securities.

Eligible Collateral Government-backed loans (FHA, VA, RD, PIH) Conventional Loans

4

How the Ginnie Mae Model Distributes Risk

First Dollar Loss

Last Dollar Loss

LOSS

ES

Government Agency

Credit Enhancement*

Corporate Resources of

Issuer/ Servicer

Ginnie Mae

Relative Loss Position

$

Homeowner Equity

5

How the GSE Model Distributes Risk with High LTV

*VA covers the first 25% of the credit loss per loan, USDA RHS covers the first 90%, and FHA covers 100%; coverage of foreclosure expenses varies by agency - expenses not covered can be substantial

First Dollar Loss

Last Dollar Loss LO

SSES

Private Credit Enhancement or

Mortgage Insurance

Fannie Mae/ Freddie Mac

Relative Loss Position

$

Homeowner Equity

6

Ginnie Mae MBS Outstanding Surges, Post Financial Crisis

42 Years to Reach $1 Trillion then to $1.5 in Five Years

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

Historic trend of growth

2007-2015

$ (Billions)

Unpaid Principal Balance (UPB) 7

Ginnie Mae is Meeting or Exceeding the GSEs

$-

$10

$20

$30

$40

$50

$60

$70

$80

$90

MB

S G

ros

s Is

su

an

ce

Va

lue

30-Year and 20-Year Fixed Rate Single-Family MBS Volume share*

Ginnie Mae

Fannie Mae

Freddie Mac

*30-Year and 20-Year MBS products include: Fannie Mae: FNM30, FNM30HILTV, FNM30JM, FNM30INITIO, FNM30RELO, FNM30FHA, FNM30PPAYP, FNM20, FNM20HILTV Freddie Mac: FHL30CONV, FHL30RELO, FHLG30INIOJM, FHL30FHA, FHL30, FHLG30MOD, FHLG30FHA, FHLG30RELO, FHLG30PPAYP, FHLG30INITIO, FHLG30HILTV, FHLG30JM, FHLG30, FHLG20, FHLG20JM, FHL20HILTV, FHL20INITIO Ginnie Mae: GNMII30M, GNM30, GNMII30C, GNMII30MJM, GNMIIBD, GNMIIFHASEC, GNMBD, GNM20, GNMII20M, GNMII20C

$ (Billions)

8

Ginnie Mae Model Is Stable but the Market is Dynamic

Ginnie Mae guaranteed the first MBS in the world in 1970 and continues to

run a single security platform for all 500 approved issuers.

We do this via the administration of a mortgage-backed securities (MBS)

program collateralized by mortgage loans that are insured by government

agencies (FHA, VA, USDA).

$1.5 trillion of loans currently serve as collateral in MBS pools guaranteed

by Ginnie Mae.

Issuers pay Ginnie Mae commitment fees and guarantee fees to use the

government wrap.

Ginnie Mae has earned profits averaging $900 million the past five fiscal

years. 9

Composition of Ginnie Mae MBS Single Family Issuance

Volume

82%

18%

FY2010

Depositories Non-Depositories

FY2010 SF Issuance Volume: $413 B

49%

51%

FY2014

Depositories Non-Depositories

FY2014 SF Issuance Volume: $277 B

*Ginnie Mae Issuers are responsible for servicing the securities & the loans backing them; in the case an original

Issuer sells servicing to another entity, the new entity takes on all obligations of the original Issuer

10

Top 5 Issuer Comparison by Issuance, FY2011 & FY2014

Top 5 Issuers by SF MBS Issuance in FY 2011

Rank Issuer Name % of Total Issuance

1 WELLS FARGO BANK 34.6%

2 BANK OF AMERICA 26.4%

3 JP MORGAN CHASE BANK 7.7%

4 PHH MORTGAGE CORP 3.7%

5 U. S. BANK 3.5%

Total Top 5 Issuers: 75.9%

Ginnie Mae Single Family Issuance: $322.3 billion

Red = Issuers that have fallen out of the top 5 since 2011 Green = Issuers that have risen to the top 5 since 2011

Top 5 Issuers by SF MBS Issuance in FY 2014

Rank Issuer Name % of Total Issuance

1 WELLS FARGO BANK 22.4%

2 JP MORGAN CHASE BANK 6.7%

3 PENNYMAC LOAN SERVICES 5.7%

4 QUICKEN LOANS INC. 4.5%

5 FREEDOM MORTGAGE CORP 4.1%

Total Top 5 Issuers: 43.4%

Ginnie Mae Single Family Issuance: $277.5 billion

11

12

Differences Between Banks & Non-Banks

Depositories Non Depositories

Prudential Oversight FDIC, OCC,

NCUA, Federal Reserve Bank

Ginnie Mae

Financial Structure Long-term

Equity Based Complex; mono-line business; fragmented sources of capital

Liquidity Deposits

Significantly more complex than depository institutions: Diverse sources of funding

including lines of credit, REITS, private equity

12

Revised Net Worth & Liquidity Requirements for Single-

Family Issuers

Single-Family Issuer Minimum Net Worth:

Minimum adjusted net worth requirement of $2,500,000 plus 0.20%

(20 basis points) of the Issuer's total effective outstanding single-

family obligations has been increased to $2,500,000 plus 0.35%

(35 basis points) of the Issuer's total effective outstanding single-

family obligations.

Single-Family Issuer Minimum Liquidity:

Minimum liquid assets requirement of 20% of required net worth

has been changed to the greater of $1,000,000 or 0.10% (10 basis

points) of the Issuer's outstanding single-family securities.

13

US Bank’s State & Local Housing Agency Footprint

Montana

Nebraska

Kansas

Arizona Oklahoma

Texas

Arkansas

Minnesota

Ohio

California

Illinois

Pennsylvania

STATE

LOCAL

STATE & LOCAL

VT

Tennessee South

Carolina

Nevada

Maryland

Delaware

South

Dakota

Washington,

D.C.

Louisiana Hawaii

Colorado

Georgia

Alaska

Source: US Bank 14

FHLB Chicago Conduit Issuer Benefits to Small Lenders

Community banks, credit unions, and other small banks will be able to

access the Ginnie Mae system more easily through the FHLB Chicago

(FHLBC) Conduit.

The FHLBC Conduit will allow approved smaller institutions to sell loans to

the FHLBC, which will aggregate them and issue Ginnie Mae MBS.

Participating small lenders will obtain better pricing for loans through the

FHLBC Conduit than through the sale of whole loans.

Aggregators often require the sale of a loan’s servicing as well, but only

pay a fraction of its market value – smaller lenders will gain more pricing

leverage through the Conduit.

The FHLBC Conduit will help smaller lenders maintain and develop

customer relationships since the Conduit includes the option to retain

servicing.

15

16

Summary

Non-banks are rapidly transforming the market by playing a critical role in

increasing access to mortgage funds for credit-worthy borrowers.

These new players provide much-needed competition and innovation to

the mortgage marketplace.

Due to their structure, they are highly complex financial institutions that

have no prudential regulator other than Ginnie Mae.

Ginnie Mae’s Salary & Expenses appropriations have not kept pace with

the growth of non-bank issuance.

Ginnie Mae needs the $28.3 million in appropriations proposed by

the Administration to hire the staff necessary to best manage risk on

behalf of American taxpayers.

16

CONTACT INFORMATION

Physical Address 550 12th Street, SW, Third Floor

Washington, DC 20024

Mary K. Kinney

Mailing Address Executive Vice President

451 7th Street, SW, Room B-133 202-708-0926

Washington, DC 20410 Mary.K.Kinney@hud.gov

Phone: 202-708-1535

Hotline: 888-446-6434

Twitter Facebook @GinnieMaeGov /ginniemae.gov