Tuesday, April 23, 2019

A Conversation with Maren Kasper of Ginnie Mae

March 18, 2019

Maren Kasper
Ginnie Mae

MarenKasperMBA Insights posed questions to Maren Kasper, acting President, EVP and Chief Operations Officer of Ginnie Mae.

Kasper, appointed as Acting President in January, is responsible for all operations for Ginnie Mae's $2.0 trillion portfolio of mortgage-backed securities. She oversees fulfillment of Ginnie Mae's core mission--connecting global bond investors with domestic mortgage borrowers while providing oversight of Ginnie's MBS issuers. She joined Ginnie Mae as Executive Vice President in June 2017 and managed all aspects of business and policy development related to Ginnie Mae's daily operations.

Kasper previously served as a Senior Advisor in the Office of the Secretary with HUD. She advised the Secretary on a broad range of housing and community development strategic priorities, from housing finance and the securitization market, to public housing and budget initiatives. Prior to joining HUD, she served as a Director with Roofstock, a real estate tech company. Before that, she worked for Dwell Finance, a Blackstone-owned real estate lender, and Wells Fargo Securities, Equity Research.

MBA INSIGHTS: You've had a busy couple of months since being named Acting President of Ginnie Mae. What have been your takeaways so far?

MAREN KASPER, GINNIE MAE: All of us at Ginnie continue to be focused on a core set of priorities that have been set over the past year or two. I am honored to lead the agency in an acting capacity, particularly given the dedicated and talented staff that continues to deliver on Ginnie Mae's mission in such a dynamic time for the industry. We have a robust agenda for the coming year, and I am excited about our progress on the initiatives laid out in our Ginnie Mae 2020 white paper ( Following through on these priorities will help the agency evolve in the key areas of technology modernization, counterparty risk and program innovation.

INSIGHTS: Do you foresee any shift in priorities for Ginnie Mae in the year ahead?

KASPER: No, I do not foresee any major priority shifts for Ginnie Mae in the near future. I was fortunate to work closely with Michael Bright to develop our current set of priorities as discussed in the Ginnie Mae 2020 white paper ( As we execute against these initiatives, I believe the organization is on the right track and is focused on its mission. I'm committed to maintaining the integrity of our MBS and to working collaboratively with our Issuers as they manage the current business landscape of declining origination volume and a challenging profit landscape.

INSIGHTS: A decade ago, Ginnie Mae was guarantor on nearly $500 billion in outstanding securities. Today, that figure is above $2 trillion. How does this growth affect the way you think about risk management?

KASPER: Our growth has come as the mortgage lending market shifted away from the PLS market and depositories have retreated from the government lending space. Both of those dramatic market shifts have had a profound impact on how Ginnie Mae looks at risk management. In years past, our risk management program consisted largely of monitoring compliance with program standards.

Now, the stakes are much larger, and we have found ourselves needing to evaluate new kinds of business models and transactions, operational risk resulting from networked business constructs, and cyber risk. Our portfolio of risk management responsibilities feels much more demanding than it had been, and it has required us to continually re-examine and push ourselves to evolve.

INSIGHTS: Another important change over the past decade is the larger role played by independent mortgage banks in FHA/VA/RD lending and, as a result, Ginnie Mae issuance. Can you talk about how you view IMBs in the mortgage lending ecosystem, as well as in the Ginnie Mae issuer base?

KASPER: Independent mortgage banks are critical to the mortgage lending ecosystem. Their share of newly originated Ginnie Mae MBS exceeded 75 percent in fiscal 2018. The flexibility of the IMB lending model was essential for the continued financing of American homeownership after the financial crisis, filling the gap left after depository institutions pulled back significantly from government-insured mortgage lending. I hate to think what it would have been like if they hadn't been there, willing and able to fill the void.

That said, there is no denying the reality that the mortgage finance system, and the Ginnie Mae program, have become much more reliant on a set of mostly monoline businesses, that are more dependent on external sources of capital, and that don't have a federal safety and soundness regulator. We are clearly living in a world that is very different from ten years ago in the context of the dollar amount Ginnie Mae has at risk.

And one thing that has not changed, which MBA members understand, is that the responsibilities that come with being a Ginnie Mae Issuer are serious. The obligation that Issuers bear to make sure that Ginnie Mae MBS investors receive timely payment of principal and interest is fundamental to the operation of the market. Issuers need to be prepared for the potentially substantial call on their corporate resources to meet these responsibilities in times of stress. That preparation is a conversation we think is critical to foster.

What I hope is that we can engage in the conversion about these realities, and the appropriate response to them, in a collaborative manner that doesn't leave IMBs feeling that their business model is being unfairly criticized. IMBs have a long history in our program and we believe the program can evolve in ways that strengthen its safety and stability without compromising access to credit and with a very diverse set of program participants serving the market.

INSIGHTS: In recent months, Ginnie Mae has been signaling changes in the way it oversees Issuers. Can you discuss those changes in greater detail? What you are trying to accomplish with these changes, and where are you and your team in that process?

KASPER: As I noted already, the size of our program has grown substantially, and the market landscape has shifted significantly. Any responsible Ginnie Mae leader would recognize the need to enhance the risk management framework with the clear goal of ensuring the program fulfills its mission and mandates across all economic cycles. That means ensuring that our Issuers are capable of handling the responsibilities that come with participating in our program in the event of market stress, and that Ginnie Mae is prepared and protected as well.

We are currently in the process of working with our Issuers to better understand their business models, developing enhanced modeling capabilities, and evaluating where Ginnie Mae has the most risk exposure today and what that could look like in the future. This is all still in the development phase and there is no pre-conceived policy agenda the agency will suddenly reveal without collaboration with key stakeholders.

Key to our thinking behind any counterparty risk management enhancements will be the preservation of value of the Ginnie Mae servicing asset, which is a very significant mitigant to the risk Ginnie Mae faces in the event of an Issuer default. It's a vital source of cash flow for Issuers and, in a worst-case scenario, the collateral for our guaranty. Ensuring that this asset carries sufficient value is critical for Ginnie Mae. We think the average Issuer with the average Ginnie Mae servicing portfolio is on solid ground in this respect, so our focus is on outliers and ensuring they don't pose undue risk. And, we want to take prudent steps where possible to enhance access to additional sources of capital for the servicing asset.

Additionally, Ginnie Mae has enhanced its monitoring of Issuers on a case-by-case basis. The size of our business and the variety of Issuers in our program are two factors that lead us to apply a risk management framework that is unique to the companies in our program. A one-size-fits-all approach can often be too blunt and unnecessarily restrictive. Therefore, in working with Issuers on a case-by-case basis, Ginnie seeks to improve the risk profile of certain Issuers as circumstances require without unduly restricting the full universe of participants in the program.

We are in the midst of a series of very constructive liquidity meetings with the top 15 non-depository institutions in the Ginnie Mae program. This set of Issuers represents about 50% of the $2 trillion Ginnie Mae MBS outstanding. The meetings are designed to hear from the Issuers where they are investing in their business today, how they think about liquidity and what that could look like in a time of stress. Ginnie Mae plans to publish a summary of its key general observations from these meetings, so that Issuers and other stakeholders can have a better understanding of what we learned.

Finally, Ginnie Mae is developing stress tests, an effort currently focused on participants in the single-family program. While we see stress testing as a potentially very helpful risk assessment tool, this effort continues to be in its early days. When ready, Ginnie Mae anticipates soliciting feedback on the stress test process so that participants have the opportunity to shape our approach and help Ginnie Mae use stress testing in the most beneficial manner.

INSIGHTS: How do you expect Issuer oversight to be differentiated across Issuers--will Ginnie Mae "right-size" the counterparty assessments for the size or business-model complexity of the issuer? For example, will smaller Issuers be subject to the same expectations and requirements as larger, more-active Issuers?

KASPER: Yes, we fully expect a "right-size" approach to our assessment and requirements, and already do that to a fair extent. We have already said that very large institutions, ones that may pose particular challenges to the system should they fail, may be subjected to additional requirements. We think that just makes sense. As described earlier, we are trying to expand our capabilities in order to take a more tailored approach to managing risk, as opposed to making every rule or action a one-size-fits-all proposition.

I want to be clear that Ginnie Mae has no bias when it comes to institutional size. We believe our mandate includes serving a wide variety of issuer profiles to ensure that borrowers have competitive access to credit. Our approach focuses on assessing whether an institution has positioned itself to be a successful participant in the program, given the business model it employs.

INSIGHTS: What proactive steps can Issuers be taking to ensure they are meeting Ginnie Mae expectations and requirements? What guidance, parameters, or thresholds will Ginnie Mae be providing to assist Issuers in this process?

KASPER: In my view, the best and most proactive approach an Issuer can take with Ginnie Mae is one of "no surprises." The better Ginnie Mae understands an Issuer's business model and the issues they are facing, the better we are able to manage our risk. Issuers should not be hesitant to communicate with us. Ginnie Mae is also committed to being more transparent with the market and Issuers with regard to how we evaluate risk and the tools that we use to do so. The rescheduled Ginnie Mae Summit in June ( will be a great opportunity for Ginnie Mae and our Issuers to engage around these issues.

INSIGHTS: Looking ahead, how do you expect Ginnie Mae to evaluate these changes?

KASPER: Evaluation will happen in conjunction with any policy developments at Ginnie Mae. The agency is committed to being as thoughtful as possible when developing new requirements or implementing new tools to avoid market disruption and unintended consequences. We look forward to working with MBA and its members as we continue to evolve and soliciting feedback will be a big part of the process.

The credit cycle has not been repealed and the risk management of a $2 trillion program requires focus on what happens at all points through that cycle. Ultimately, success will be defined by how we answer some simple questions when the market environment tests us.

--"Was Ginnie Mae prepared for times of stress?"
--"Did Ginnie Mae take the right steps to ensure Issuers of all sizes and types were capable of operating through the cycle?"
--"Did our security continue to be attractive to investors around the globe to attract capital to our housing finance system?"
--And most importantly, "Were borrowers served without major disruption with affordable mortgage financing?"

I think we all share a responsibility to work toward making sure the answers to those questions turn out to be good ones.

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