Ginnie Mae heading to $1 trillion in government backed mortgage debt by 2010

July 22, 2009 by · 1 Comment
Filed under: Policy News 

Can you hear that?  You may ask what your listening for, it sounds like a massive black-hole that is sucking down taxpayer dollars.  If I am reading this article right it translates into, Ginnie Mae is the next GSE that is going to get the big-old bailout from Uncle Sam.  It literally says that are not changing their lending requirements and their is no credit score requirement.  That sounds like the same recipe that got the other GSEs’ in trouble in the first place.   Icing on the cake will be when we see Ginnie Mae’s maximum loan size that make the loan a “conforming”, increased so that more borrowers qualify.  We will need to watch this closely.

News (Bloomberg):

Mortgage bonds guaranteed by U.S. agency Ginnie Mae will probably swell to $1 trillion by the end of 2010 because borrowers with low down payments or credit scores can only qualify for government-insured loans, Bank of America Corp. analysts said.

The Federal Housing Administration, which insures loans with down payments as low as 3.5 percent and has no credit-score requirements, is “the only source of funding for these leveraged borrowers,” Ankur Mehta and Ohmsatya Ravi, the New York-based analysts, wrote in a report yesterday.

Debt explicitly backed by the U.S. through Ginnie Mae, formally known as the Government National Mortgage Association, climbed to $680 billion as of June 30 from $360 billion two years earlier, as record home-price declines caused the collapse of the “non-agency” mortgage-bond market and tougher standards at banks, mortgage insurers and mortgage-finance companies Fannie Mae and Freddie Mac, the analysts said.

Further growth will be fueled by more borrowers using FHA loans to buy homes or to refinance, either to tap home equity or to lower their payments, they wrote. Lenders package those mortgages into bonds backed by Ginnie Mae.

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Comments

One Response to “Ginnie Mae heading to $1 trillion in government backed mortgage debt by 2010”
  1. I’m out in the field and closing another FHA loan tomorrow.

    And, I share your concern with Ginnie Mae. What are these people thinking?

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