Considerations for Originating and Servicing Government Loans. Gregory A. Keith, Senior Vice President and CRO

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1 Considerations for Originating and Servicing Government Loans Gregory A. Keith, Senior Vice President and CRO

2 Ginnie Mae Is a Private-Public Partnership Success Story Ginnie Mae s relevance is evidenced in its steady, increased growth and its share of the secondary mortgage market. $1.7 Trillion 433 Current Outstanding Ginnie Mae Securities over 10 million loans Approved Issuers No taxpayer dollars. Net income of $2.8 billion in FY In FY 2016 Ginnie Mae funded two out of every five mortgages. Served more than 2 million people in FY 2016 alone. As of November 2016 $Profit $39 Billion $612 Billion 141 Never needed taxpayer funds. Return money to Treasury every year. P & I Paid to Investors Monthly $612 billion added to housing market in last 4 years Current Staffing Level 2

3 Ginnie Mae Risk Model (supporting multiple issuers) Last Dollar Loss LOSSES $ Mortgage Insurance FHA/VA/RHS (statutory) Resources of Ginnie Mae Issuer ** Government Guarantee First Dollar Loss Homeowner Equity Loss Waterfall *VA covers the first 25% of the credit loss per loan, USDA RHS covers the first 90%, and FHA covers 100%; coverage of foreclosure expenses varies by agency - expenses not covered can be substantial ** As of September 30, 2016, total Issuer capital standing between the government s guarantee and losses was approximately $846 Billion

4 Fannie Mae and Freddie Mac Risk Model Last Dollar Loss LOSSES $ Private Mortgage Insurance Fannie Mae/ Freddie Mac First Dollar Loss Homeowner Equity Loss Waterfall 4

5 Ginnie Mae Issuance Marketshare Billions $110.0 Single Family MBS Issuance $100.0 $90.0 $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 Ginnie Mae s MBS issuance market share continues to grow, surpassing Freddie Mac, and approaching the same level as Fannie Mae GNMA: Aug 2016 $46.7 Billion, 34% $10.0 $- *Ginnie Mae includes Single Family and HECM Ginnie Mae* Fannie Mae Freddie Mac 5

6 Ginnie Mae Passes Freddie Mac in MBS Outstanding Source: Urban Institute calculations based on embs data 6

7 The Big 3 Banks Share of Monthly SF Issuances has Declined Substantially Over the Past 6 Years Percent of Issuances by Wells/Chase/Bank of America Note: The big 3 banks are comprised of Wells Fargo, JP Morgan Chase, and Bank of America 7

8 FICOs Have Dropped Along with Big Three Banks Market Share Average FICO Score % 70% 60% 50% 40% 30% 20% 10% 0% Percent of Issuances by Wells/Chase/Bank of America May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Percent of Issuance by Big 3 Banks Total FICO Note: The big 3 banks are comprised of Wells Fargo, JP Morgan Chase, and Bank of America 8

9 Evolution of Market Players There has been a significant shift from Depositories to Non-Depositories participating in Ginnie Mae s programs both in absolute numbers and percentage. In 2016, Non-Depositories accounted for 73% of Single Family approved Issuers. Issuer Count (Single Family) FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 * FY2016 YTD is through August Depository Non-Depository 9

10 Non-Depository vs. Depository Issuances (Single Family) Billions $400 $343 $350 $299 $300 $276 $272 $281 $261 $250 $200 $142 $142 $135 $143 $150 $111 $100 $89 $46 $46 $50 $- FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 YTD * Depositories Non-Depositories 12% 27% 49% 51% * FY2016 YTD is through August 88% FY 2010 FY % FY 2016 YTD * 10

11 Top 5 Issuers Comparison by Issuance, 2011 & 2016* (Single Family) Top 5 Issuers of SF MBS Issuance in 2011 Rank Issuer Name % Of Total Issuance 1 WELLS FARGO BANK, NA. 34% 2 BANK OF AMERICA 27% 3 JP MORGAN CHASE BANK 8% 4 PHH MORTGAGE CORP 4% 5 U. S. BANK 4% Total Top 5 Issuers: 76% Total Issuance 2011 $ billion Top 5 Issuers of SF MBS Issuance in 2016 Rank Issuer Name % Of Total Issuance 1 WELLS FARGO BANK, NA. 10% 2 PENNYMAC LOAN SERVICES, LLC 8% 3 FREEDOM MORTGAGE CORPORATION 7% 4 QUICKEN LOANS INC. 5% 5 LAKEVIEW LOAN SERVICING, LLC 5% Total Top 5 Issuers: 40% Total Issuance 2016 $ billion Green = Issuers who have risen into the top 5 since 2011 Red = Issuers who have fallen out of the top 5 since 2011 * September 2010 through August of 2011, September 2015 through August

12 Non-Depository vs. Depository Outstanding Portfolio (Single Family) Billions $1,000 $800 $600 $400 $200 $866 $999 $113 $137 $1,047 $191 $972 $362 $928 $464 $817 $649 $772 $792 $- Sep Sep Sep Sep Sep Sep Aug Sep 2010 Depositories Non-Depositories Sep 2015 Aug % 33% 88% 67% 51% 49% 12

13 Top 15 Issuers By Portfolio Size as of August 2016 (Single Family) Issuer Name Unpaid Principal Balance (Billions) 3355 WELLS FARGO BANK, NA. $ PENNYMAC LOAN SERVICES, LLC $ JP MORGAN CHASE BANK N.A. $ LAKEVIEW LOAN SERVICING, LLC $ U. S. BANK, NA $ FREEDOM MORTGAGE CORPORATION $ NATIONSTAR MORTGAGE, LLC $ QUICKEN LOANS INC. $ BANK OF AMERICA, N.A. $ PINGORA LOAN SERVICING, LLC. $ CARRINGTON MORTGAGE SERVICES, $ USAA FEDERAL SAVINGS BANK $ CALIBER HOME LOANS, INC. $ DITECH FINANCIAL LLC $ OCWEN LOAN SERVICING, LLC $ Depositories 10 Non-Depositories 13

14 Acknowledgement Agreements (AA) Total UPB - $1.7 Trillion Depository Non-Depository There are 237 Non-Depository issuers without acknowledgement agreements holding $340B in total outstanding MBS (39% of UPB held by Non-Depositories). 53% $874 Billion 47% $787 Billion Total number of AAs: 38 Number of Issuers with AA: 38 Number of Secured Parties: 19 Non-Depository UPB ($B) Without Acknowledgement Agreement 39% $340 Billion 61% $534 Billion With Acknowledgement Agreement 14

15 Geographic Distribution of Investors $1.7 Trillion Portfolio 35% 65% Foreign China.150 Billion Japan.200 Billion South Korea..30 Billion Taiwan 15 Billion Other.200 Billion Domestic Foreign What s next Europe (neg rates) France, Norway, Belgium, Germany 15

16 Transfers PIIT (Pools Issued for Immediate Transfer) Volume (Single Family) Billions $45 $40 $35 $30 There has been a significant increase in PIIT volume in the past two to three years. $41 $25 $24 $20 $15 * FY2016 YTD is through August $10 $5 $- $1 $1 $1 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 YTD $8 16

17 Number of PIIT Buyers and Sellers (Single Family) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 YTD Buyers Sellers Participants of the PIIT program has also increased significantly. The average Adjusted Net Worth of Sellers Depositories: $24.2B Non-Depositories: $82.7M Buyers (all Non-Depositories): $814.2M * FY2016 YTD is through August 17

18 BULK Transfer Volume (Single Family) Billions $160 $140 $120 $100 $80 $60 $40 $20 $- FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 YTD * FY2016 YTD is through August Depositories - Depositories Non-Depositories - Depositories Non-Depositories - Non-Depositories Depositories - Non-Depositories 18