A PublicPrivate Partnership to Expand Home Ownership Briefing Packet

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A Public-Private Partnership to Expand Home
OwnershipBriefing Packet
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What is Ginnie Mae

• Ginnie Mae (GNMA) is the Govt Natl Mortgage
  Association, part of HUD
• GNMA provides a guarantee to investors who
  purchase FHA and VA home loans bundled into
  securities
• These securities are sold to investors and backed
  by the full faith and credit of the U.S.
  government

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OverviewGinnie Mae Public-Private Partnership

• Expands home ownership to those with difficulty
  obtaining loans minorities, low-moderate income,
  first time buyers
• Provides consumers more choice with increased
  price advantages and innovations
• Spreads some risk of default to private sector,
  benefiting taxpayers

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How It Works

• Currently, GNMA securtized-home loans are insured
  only by government agencies (FHA and VA)
• New program allows the private sector to insure
  GNMA loans
• Private insurance results in reduced risk to
  taxpayers
• Reduced taxpayer risk more capital available to
  insure home mortgages more home owners

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Complements FHA Program

• New program expands opportunities for home loans
• Currently, more than half of all FHA loans go to
  buyers with down payments of 3 or less
• New program strengthens GNMA by focusing on
  3-10 down payment range
• This allows GNMA to securitize more loans in that
  3-10 range, resulting in more loan opportunities

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Consumer Benefits

• More affordable housing opportunities
• More choices for home-buyers
• Competition gives consumers price advantage
• Lenders have better ability to target
  under-served populations

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Consumer Benefits

• More automated loan-approval systems for consumer
  loan approval
• Currently lenders can only use two automated
  loan-approval systems for consumers seeking
  mortgages
• New program gives lenders more choices, meaning
  greater opportunities for consumer loan approval
  (1/3 currently rejected would be approved)

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Taxpayer Benefits

• Losses from default spread between government AND
  private insurers (currently all losses borne by
  taxpayers)
• New program employs private sector methods for
  mitigating persons financial problems
• Keeps more homeowners in homes
• Keeps more homes occupied, neighborhoods safer

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Government Benefits

• Stronger Ginnie Mae
• Compliments FHA, VA
• Broader geographic/demographic dispersion of
  loans (more low-income and minority loans)
• Strengthens GNMA mission - more people with
  homes, especially underserved populations

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Lender Benefits

• Increased size of market
• More loan approvals
• Fewer loan defaults
• Deeper insurance coverage
• Greater control over underwriting decisions

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• Home buyer
• Greater opportunity
• for loan approval
• Lower costs
• M.I. cancellation
• More choices

• Lender / Servicer
• Deeper M.I. Coverage
• More loan approvals
• More money to make loans
• Fewer defaults

More homeowners

• GNMA
• Guarantee more loans
• Utilize innovations of
• private sector

• Taxpayers
• More income to U.S.
• Treasury
• Spread risk from default

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Private MIs Absorb Risk