Ginnie Mae: 35 Years of Bringing Wall Street to Main Street

Remarks by Ronald A. Rosenfeld at the 35th Anniversary of Ginnie Mae, Washington D.C. - December 17, 2003

It is indeed a pleasure and a privilege to be President of Ginnie Mae on this historic anniversary. For 35 years, we have brought Wall Street to Main Street through our guaranty of over two trillion dollars of mortgage-backed securities, which translates into helping over 30 million Americans realize their dream of homeownership.

Right after I was sworn in, I ordered thousands of business cards because I had such a great title, i.e., President of a government enterprise that made money, located my choice parking space, and made sure that the TV remote channel changer worked because Ginnie Mae may be the only place in HUD where you have time to watch TV.

Shortly after starting work, I heard that there hadn't been any significant contact between Ginnie Mae and Fannie Mae since before anyone could remember. Being neither shy nor patient, I made arrangements to meet Frank Raines. At our meeting in his office, I said that we at Ginnie Mae have better credit, and he at Fannie Mae has better talent, and that we ought to do some things collectively. He could have not been more accommodating or impressive and some dialogue has occurred.

But in retrospect, I was wrong in what I said to Frank Raines. We clearly have better credit, but our people are every bit as talented as the employees working with any of the GSE's. As a matter of fact, in the area of financial reporting, we actually know where we are every day. Knowing where you are is a good foundation for moving forward. That being said let me tell you where we're going within the next 12 months.

Recognizing the enormous change in our industry brought about by technology and the consolidation of our issuers, we have reassessed the requirements we impose in terms of processes and servicing reserves. With 63 percent of our business being provided by five issuers, we simply don't need to increase the cost of mortgage finance by unnecessary burdens on our partners. With the competitive nature of the industry, we feel that most savings realized by our issuers will be passed on to the homebuyer, thus we see significant growth in our Ginnie II program.

We created a program with a consortium of Home Loan Banks led by the Federal Home Loan Bank of Chicago to credit enhance -- with our full faith and credit guaranty -- a debenture issued by the Home Loan Banks. The quid pro quo of this credit enhancement was a pledge of 102 percent collateral and an equal split of the economic benefit created. We have elected to postpone the pursuit of this program pending a clarification of the GSE oversight matter. We believe, however, that this concept offers benefits to homebuyers, the US Treasury and low- and moderate-income Americans, and we intend to pursue it in a different environment.

In order to satisfy investor demand for additional risk management and yield enhancement securities, we are introducing a Ginnie Mae mortgage-backed strips product that will enable broker/dealers to create interest-only and principal-only securities from Ginnie Mae mortgage-backed securities. We expect that this product will be available by July 2004.

As a companion product, we are also introducing a Ginnie Mae-guaranteed interest-only security created from mortgage servicing rights on loans contained within Ginnie Mae mortgage-backed securities. We expect that this product will be available by the end of the fiscal year.

We believe that the introduction of these products will increase demand for Ginnie Mae mortgage-backed securities and make doing business with Ginnie Mae more attractive for our partners. These new products will help Ginnie Mae better fulfill its mission of expanding affordable housing in America by linking global capital markets to the nation's housing markets.

That's where we're going in the next 12 months. In the 13th month from now, my picture will go up on the wall of the conference room and I will go out the door for the last time, leaving for the next President the opportunity to work with a group of talented, dedicated professionals who devote their energies to bring the dream of homeownership to reality.