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Ginnie Mae should be separated from HUD, former Ginnie president says

The former head of Ginnie Mae says it is time to put some distance between the housing-securities insurer and its current parent, the U.S. Department of Housing and Urban Development (HUD).

Former Ginnie Mae CEO Joseph Murin

Former Ginnie President Joseph Murin argues that the  government-owned corporation's status as part of HUD has hamstrung its operations.

“They really need to be able to manage to their own expectations and manage the risks associated with what they are doing [and] that isn’t the case,” Murin told Scotsman Guide News.

Murin noted that Ginnie’s role has grown substantially with the growth of the Federal Housing Administration (FHA) and Veterans Affairs (VA) loan programs. Ginnie is also under added pressure to monitor Ginnie-backed securities issued by nonbanks, which have taken on a leading role in issuance.

This past year, current Ginnie President Ted Tozer was turned down by the Office of Budget and Management for an additional $5 million for monitoring Ginnie-issued securities.

“I believe that the only reason that [Tozer] was denied is that he is associated with and is part of the HUD operation,” Murin said. “So he doesn’t have the freedom to do what he needs to do to protect the franchise and to be able to grow the franchise as the franchise has grown over the last few years.”

Murin, who was Ginnie's president for 13 months through August 2009,  also said Ginnie will struggle to attract and retain top talent because it is constrained by the government's pay scale. He also argued that Ginnie’s role will inevitably increase as a greater percentage of Hispanics, Asians and African Americans become homeowners over the next decades.

Ginnie Mae and GSE reform

Ginnie Mae, also known as the Government National Mortgage Association, insures bonds supported by pools of government loans, primarily FHA, VA and United States Department of Agriculture (USDA) loans. Unlike  Freddie Mac and Fannie Mae, Ginnie doesn’t purchase the loans but functions as an intermediary standing between investors in the securities and the issuers. Through Ginnie’s backing, investors in the securities have an explicit government guarantee.

In a recent article penned for the Urban Institute, Murin and two other co-authors advocated for a greatly expanded role for Ginnie Mae in housing finance. He envisions a standalone Ginnie Mae taking over the roles of the government-sponsored enterprises Fannie Mae and Freddie Mae. This new entity, dubbed Ginnie Mae 2.0, would be overseen by the Federal Housing Finance Agency.

Gary Acosta, chief executive officer of the National Association of Hispanic Real Estate Professionals (NAHREP) and a co-author with Murin of the Urban Institute article, said NAHREP sees the Ginne Mae model as the least disruptive of the options for GSE reform.  

“The Ginnie platform is established; it has a proven track record and it has the confidence of the investor community,” Acosta said. “As we get closer to having to make this decision, it is clear we need a path that creates the least disruption possible to the marketplace.”

Acosta also said he doesn’t believe there’s enough political support to reform and recapitalize the GSEs.

“It just doesn’t seem that powers that be have an appetite for that,” Acosta said. “I think they want to move to something that is more sustainable and maybe not so connected with the past.”  

Such a proposal would be highly controversial, however. Trade groups that represent small lenders, such as the Community Mortgage Lenders of America (CMLA), oppose the so-called Ginnie model, fearing only a small group of large companies will issue the securities and monopolize the servicing rights. These associations, along with some housing advocates and investors in Fannie and Freddie, want to see the GSEs recapitalized and released from an eight-year conservatorship.

“It means the mid-size and small lenders have less opportunity to build financial stability for their companies,” CMLA Executive Director Glen Corso said.  “Hence our concern. Right now mid-size and small lenders have the opportunity to retain the servicing on the Fannie and Freddie loans they originate.”

Murin, however, said GSE reform that promotes the Ginnie model has a chance in the next administration. He acknowledged that it will be difficult to wrest away Ginnie Mae from HUD, however.

“First of all, there is no HUD secretary that wants to throw up their hands and say, ‘Let them go,’” Murin said.  “Let’s face it. That is not something a HUD secretary wants to do, but I think Congress can make that change.”  


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