Statement by Ginnie Mae Acting President Speaks at the Barclays U.S. Rates and Residential Mortgage-Backed Securities (RMBS) Conference

​Hello, and thank you for the invit​ation to speak here this afternoon. Thank you to Barclays for hosting such a great conference. Ginnie Mae has worked with Barclays for many years, and we look forward to building on this partnership in the years ahead.

I had the pleasure of attending this conference last year, and I am so delighted to be here again this year and to see so many familiar faces. A special thank you to Ms. Macleod for hosting this prestigious event.

The U.S.-Japanese bilateral economic relationship is one of my country's strongest and deepest partnerships, based on a history of shared values, mutual interests, and common goals. We are working together at all levels of government and the private sector to build a global partnership fit to address the complex, interconnected challenges of today and tomorrow. I am confident our partnership will be mutually beneficial in the years to come.

The continued economic partnership between the United States and this region is particularly important as we navigate how to promote our shared values of homeownership and care for seniors amid a myriad of factors impacting the post-pandemic global economy. Ginnie Mae is a great example of this collective work. Through regular exchanges of policy ideas with our peer institutions in the region and through investments in Ginnie Mae mortgage-backed securities that bring our economies closer together, our work to create a more accessible and resilient housing market continues.

Ginnie Mae is a government-owned corporation that provides the full-faith and credit guaranty of the U.S. Government on the timely payment of principal and interest on MBS to investors.

We were chartered with the task of promoting access to mortgage credit nationwide, with a special emphasis on underserved groups, by improving the distribution of investment capital available ​for mortgage financing.

This mission is one Congress gave us, and our dedicated staff work tirelessly every day to realize it. In our 56 years of existence, we have not missed a single principal and interest payment to investors.

Our guaranty eliminates credit risk for investors, protecting against all default events: borrower defaults on mortgage payments, Issuer defaults on Guaranty Agreements, and natural disaster-induced defaults. And it's this investor confidence in our guaranty that has created a deeply liquid market for our MBS. We participate in the second-largest fixed-income market in the world after U.S. Treasuries, with nearly $300 in average daily trading volume globally among the Agencies.

Ginnie Mae was there when the housing finance system in the United States was created, along with Fannie Mae and Freddie Mac. In 1970, Ginnie Mae became the first entity to issue a mortgage bond, and we have been leaders in the market ever since.

As with any capital markets-based approach to finance, the interplay between each group of stakeholders is integral. Ginnie Mae has long been a hub connecting bond issuers, investors, and borrowers. As we have before, we will continue to assess the interests of all stakeholders as we respond to market events.

Since we were last in Tokyo, the twin stories in the U.S. housing market are the cooling of inflation and the resulting potential of a cut in interest rates this month. Since its recent peak in May 2022, the consumer price index has dropped gradually, from close to 9 percent to 2.5 percent today. At the same time, the U.S. labor market remains strong but less tight than it was in 2023.

Although mortgage rates have come down slightly in anticipation of a rate cut, housing affordability remains constrained, given home price appreciation. The housing lock-in effect and the lack of supply have broadly elevated home prices across the country, putting housing affordability at a nearly two-decade low.

However, even in this economic environment, Ginnie Mae issuance remains strong. August issuance was $39 billion, a high watermark for the year. For nearly 2 years, Ginnie Mae has continued to see monthly issuance that has outpaced each of the government-sponsored enterprises.

Strong issuance in a calmer rate environment has transformed our coupon stack, with current offerings ranging from 2 to 7.5 percent. With more coupon selection options, favorable pricing, and yields to benchmark hovering around 140 basis points, the demand for Agency MBS remains very strong.

Foreign demand remains steady, with dollar-denominated securities representing a safe haven against geopolitical volatility. Our global investor base understands the safety of our government guaranty-and the depth and liquidity of the global MBS market.

Serious delinquencies, defined as three or more missed payments, represent less than 4 percent of our portfolio, reflecting prepandemic levels.

Given the mandate in our charter to provide liquidity for loans for low- and moderate-income borrowers (LMI), the growing interest in environment, social, and governance investment opportunities-or ESG-presents a unique opportunity for Ginnie Mae. Listening to the market and investors, we have built an ESG strategy centered around telling the story of our structural social impact. In disclosing data on key borrower characteristics, we can provide investors with security-level information to help meet ESG mandates using data-driven disclosures.

Using this data, we also produce a monthly ESG composite that provides deeper insight into our portfolio. In addition, we have created a Social Impact and Sustainability Framework that outlines how we think about what it means to be social.

Currently, our $2.6 trillion portfolio supports over 11 million homeowners- many of whom would not otherwise have access to affordable credit.

Three point two million of these borrowers, or approximately 30 percent, are classified as LMI borrowers. Approximately 40 percent of our portfolio by loan count represents first time home buyers.

Ginnie Mae's HMBS or reverse mortgage portfolio supports almost 270K seniors, of which 74.2 percent are LMI households.

And as we have been telling this story of our structural impact, awareness across the market is increasing. For those users of Bloomberg, they began flagging our single-family MBS securities with their social flag earlier this month, and we anticipate other third-party platforms will also follow suit.

In anticipation of a rate cut, we are seeing mortgage rates fall to almost a 2-year low, with FHA and VA rates falling more steeply than conventional loans. As such, we expect refinancing activity to continue to gain steam as higher coupons move into the money. Potential decreases in mortgage rates resulting from changes in monetary policy on the horizon will make loans more refinance-eligible.

We know a rate cut will challenge convexity, prompting investors to adapt strategies accordingly. The market is preparing for an increase in refinancing activity, and since the beginning of the calendar year, we have seen some investors prioritize 100 percent FHA Federal Housing Administration custom pools over to-be-announced pools. As we look ahead, we remain confident that new monthly issuance will continue around the mid- to high-$30 billion per month, adding more diversity of coupon selection in the market.

We have added a meaningful supply of higher coupons over the last few years. With rates coming down gradually, we expect more supply in the lower coupons. Ultimately, this adds more diversity to what is currently being issued, supporting greater opportunity for coupon selection.

In a world in which the Fed is no longer buying agency MBS, we will focus on meeting and growing investor demand organically. We will continue to deepen existing partnerships, like our own, through greater engagement. We will continue listening to investor needs, particularly as we evaluate new disclosures.

We will also continue to investigate new markets. At the end of July, Ginnie Mae went on a discovery engagement in Mexico City. We were encouraged by the strong interest in our product and hope it will cultivate demand in the region and support even deeper liquidity for our program.

Thank you again for this invitation. I look forward to our panel discussion.

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