By the end of fiscal year (FY) 2016, Ginnie Mae had made guaranties on loans with a remaining principal balance (RPB) of approximately $1.73 trillion.1 Through these guaranties, Ginnie Mae facilitates capital inflows to the U.S. housing market. Since 2010, Ginnie Mae’s RPB has grown by approximately 62 percent. During this time, Ginnie Mae’s business has increasingly relied on nonbanks, which now represent a majority of issuances annually.2 As the Office of Inspector General (OIG) and Ginnie Mae have previously noted, the increase in the number of nonbank issuers and their complexity present a challenge for monitoring efforts.
Ginnie Mae’s mission is to increase liquidity in the secondary mortgage market and attract new sources of capital for residential mortgages. It accomplishes this mission through its Mortgage Backed Securities (MBS) program. Under this program, Ginnie Mae issues guaranties on securities issued by private institutions, or “issuers.” The securities are backed by single-family, multifamily, manufactured housing, and home equity conversion mortgages, and these mortgages must be insured or guaranteed by a federal agency.
As HUD Inspector General Montoya noted in March 2016 Senate testimony, a “key challenge facing Ginnie Mae is the risk posed by the growing number of Ginnie Mae issuers that are institutions other than banks.” Ginnie Mae acknowledged this risk itself in 2014, saying that the shift away from “enormous banking institutions with substantial resources, diverse lines of business and deep access to low-cost funding…represents a meaningful increase in the possibility of loss to Ginnie Mae.” In response, Ginnie Mae created a five-point strategic plan to address its changing operating environment.4 Ginnie Mae has continued to raise the challenge of nonbank monitoring. In January 2017, Ginnie Mae’s outgoing President said it needed to continue to evolve to understand its nonbank risks and proactively address them.