Dear Dr. Carson,
Congratulations on your nomination to serve as the next Secretary of the U.S. Department of Housing and Urban Development . Your unique background and qualifications will undoubtedly bring a sense of energy and even renewal to one of the economy’s most important governmental departments.
That’s correct. I strongly believe HUD has a vital role to play in our economy. While political pundits and talking-heads focus on your views on affordable housing and plans for urban renewal, very little has been said about an institution which has become a driver in the American economy—and one which will fall under your oversight shortly: Ginnie Mae.
This is certainly not to belittle any of the other matters discussed in your recent testimony before the U.S. Senate. However, I hope you’ll agree that you’re inheriting an important entity of which too little is understood by far too many.
Ginnie Mae is the entity which explicitly guarantees payment of principle and interest to bond holders purchasing government-sponsored home loans. In essence, the wholly-owned government corporation facilitates a role for government backed mortgages in the securities markets. That includes the FHA and VA mortgages—which have become workhorses in the mortgage industry.
Ginnie plays an indispensable role in making homes affordable for first-time homebuyers and lower-income borrowers. Today, Ginnie has a portfolio of over $1.7 trillion in mortgage-backed securities and real estate mortgage investment conduit programs. Moreover, more of that portfolio than ever before was originated by nonbank lending companies, rather than depositories.
In the summer of 2016, Ginnie even eclipsed the portfolio of government sponsored enterprise, Freddie Mac — long considered an engine for the mortgage and housing industry. According to the Urban Institute, the total outstanding balance of Ginnie Mae mortgage-backed securities was $1.624 trillion as of May 31, compared to $1.623 trillion in outstanding Freddie Mac MBS. The Urban Institute study also revealed that Ginnie Mae issued $41.6 billion in single-family MBS in May, compared to Freddie Mac's issuance of $29.9 billion of single-family mortgage securities, which Freddie calls participation certificates.
Ginnie Mae has become an important influence on the mortgage and housing industry as well as on the market—and the American economy. But, as I write this, I note that Ginnie Mae has lost its longtime president, Ted Tozer. I also note that Ginnie Mae is understaffed in its oversight of the $1.7 trillion in home loans; forced to rely in many cases on contractors rather than employees.
Tozer and I have pleaded on numerous occasions for additional assistance, but none has been forthcoming. Both of us worked tirelessly during our tenures to win support and funding adequate for Ginnie Mae’s enormous mission, but there is still far more work to be done.
Budget allocation will be a key part of your new position, Carson. How you choose to support Ginnie Mae (and fight for funding before Congress) will have a direct impact on the American economy. As you step into your new position, you have on your hands an entity seeking a new leader which is understaffed and short on resources; yet responsible for a massive chunk of the U.S. housing market.
The composition of its portfolio is in uncharted waters, and many of the largest, most stable enterprises in our economy (global banks, etc.) have pulled away from a position allowing them to purchase distressed assets should Ginnie’s portfolio take a turn for the worse. Ginnie Mae is an economic powerhouse and an institution which helped the American housing market stabilize in the years of the Great Recession and after. It is also, left unattended, a powder keg.
I call upon the administration, at your recommendation, to name a new president for Ginnie Mae with a track record of proven success in the mortgage industry—someone who understands the unique characteristics and potential of Ginnie Mae and its role in the economy. I further call upon HUD to revisit the budget for Ginnie Mae, providing it adequate resources for oversight of its massive portfolio.
Ginnie Mae has become every bit as important to the housing and real estate industry as either of the GSEs. It’s time for us to provide it with the resources needed to guarantee its continued success.
Carson, I wish you the very best as you step into your new role at HUD, and I have no doubt you will guide it to new heights of achievement. I offer these recommendations because I believe the importance of Ginnie Mae has been overlooked by too many for too long.
I believe a healthy Ginnie Mae is a key ingredient to a healthy housing market and, in turn, a stronger American economy. And I believe that you have already demonstrated that you are more than willing to break with convention and history to do what’s best for the country. I urge you to make part of your agenda familiarizing America with the nuances of this unique institution, and hope you will take all steps needed to provide it with stable and well-supported leadership.
TMC - Chief Operating Officer
President/CEO - Pulte Financial Services