What is Ginnie Mae?
For a lot of people, even investors in the mortgage space, Ginnie Mae may be an unfamiliar name. Unlike Fannie and Freddie, who have been their own independent corporations and end up in the news a lot, Ginnie has always been under the Department of Housing and Urban Development, tucked away in a dark corner where no one really ever goes. This is likely part of the reason why it’s been difficult to find and hold a permanent leader -- it’s just not a very sexy job.
But what Ginnie does is vital for the housing market, especially when it comes to affordable housing. Officially, Ginnie guarantees payments to mortgage-backed securities (MBS) investors.The mortgages those MBS are built from include FHA, VA, Rural Housing Service (RHS), and Public and Indian Housing (PIH), both for homeowners and real estate investors.
When an FHA loan, for example, is originated, it starts with a lender that makes the loan under the program guidelines. The Federal Housing Administration then insures that loan, allowing the bank to underwrite it with a great deal of confidence, making homeownership possible with less stringent guidelines than those loans approved by Fannie or Freddie.
Once the loan is completed, it’s bundled with other, similar loans, and turned into a pool of MBS. Investors then purchase these securities, allowing the lenders to make even more loans. Ginnie Mae makes sure that the investors are confident investing in these MBS by guaranteeing them timely principal and interest payments.
The biggest little sister in the mortgage world
It may not sound like much, but without Ginnie Mae, there wouldn't be money out there for HUD-based programs, making homeownership almost impossible for a lot of people and rentals out of reach of families everywhere. In essence, what Ginnie does really enables a significant portion of the real estate market to exist.
In September 2021 alone, Ginnie Mae financed approximately 263,061 homes and apartment units, about $73 billion worth of real estate, including $3.5 billion in loans for multifamily properties. For the 2021 fiscal year, Ginnie issued a record-breaking $939 billion in MBS.
It’s a whole lot of money for no one to be in charge of, which is why it’s so critical that not just someone, but the right someone, is running the show. McCargo has big shoes to fill -- maybe even bigger shoes than she realizes.
“To me, I think the reason why the position is not filled is because of the fact that they don't really appreciate, I think, to a large degree, what Ginnie Mae does,” said Tozer in an article in American Banker. “I think that there is a gulf in people's understanding of the importance of the role and the actual importance of the role.”
The Millionacres bottom line
Although there’s never a guarantee that a nominee will be ultimately elevated to the position they’ve been nominated for, nor that they’ll be successful at that position, McCargo seems to have the chops to do the job. She’s spent the last two decades working with affordable housing policy, including seven and a half years at the Urban Institute, five of those as the Vice President of the Housing Finance Policy Center.
McCargo recently joined the U.S. Department of Housing and Urban Development as the Senior Advisor for Housing Finance in the Office of the Secretary, giving her unique insight into how HUD and Ginnie Mae work together. And, frankly, this position already gives her a built-in bridge to HUD, which hasn’t been the case for a leader of Ginnie Mae for a while.
She promises to be a friend to affordable housing, which is good for everyone, including investors looking for a stable, steady income from either property development and construction or rental units. Affordable housing and Ginnie Mae are invisible twin cogs that keep the American economy moving forward.