When Ted Tozer was confirmed as the new president of Ginnie Mae in February 2010, the agency relied on mainframe-based applications that used one of the oldest programing languages (COBOL) while overseeing and guaranteeing $1.3 trillion in mortgage-backed securities.
When Tozer came aboard, he found Ginnie had only 64 employees and a payroll of $11 million to handle all that volume.
Ginnie Mae had been running on automatic pilot for many years. It appeared to be running smoothly and profitably. But Tozer knew it was badly understaffed and needed new technology, needed to go from COBOL to the cloud.
The sudden collapse of Taylor, Bean & Whitaker in August 2009 was a wakeup call for Ginnie Mae.
Allegedly fraudulent loan transactions by the Ocala, Fla., mortgage banking and servicing firm forced Ginnie, Freddie Mac and others to recognize serious losses.
In the aftermath, Congress was finally willing to consider an increase in Ginnie Mae’s salary cap so the agency could hire more staff.
Tozer supported the Obama administration's request to raise the salary cap to $30 million for FY 2011. But Congress balked at that amount and raised the cap only to $19 million.
Each year since, Ginnie has managed to get just a little bit more from Congress and now the agency has 111 full-time employees. It also relies on outside contractors for services.
This added manpower has allowed the agency to vet and increase the number of active Ginnie Mae issuers to 304 from 214 in 2010.
It has also allowed Tozer to pursue his agenda of bringing Ginnie Mae into the 21st century.
As a mortgage executive with 30 years of experience, he knows there is much to be done.
Objectives include providing loan-level data to investors, modernizing Ginnie’s securitization platform for issuers and increasing Ginnie’s ability to spot problem issuers and servicers.
“We are building out critical functions,” Tozer told the Mortgage Bankers Association at its annual convention in Washington in late October. “For the first time, Ginnie Mae is actually monitoring servicers to see how they are complying with Federal Housing Administration rules.”
In an interview, the Ginnie Mae president explained that it is important for servicers to comply with FHA timelines for filing claims on defaulted loans. If they miss the timelines, it could “lower reimbursement and put their business in financial peril.”
Modernizing the agency’s securitization platform, which facilitates the pooling of FHA and other government-backed loans and the issuance of mortgage-backed securities, is particularly challenging.
The agency that was created in 1968 under President Lyndon Johnson is moving from mainframe-based applications to the cloud with a server-based systems environment.
Tozer is making progress. The week of Oct. 28, the secondary market agency notified its MBS issuers that the process for seeking pool numbers and commitment authority has been automated.
Starting Dec. 16, they must submit those requests electronically. Paper submissions will no longer be accepted. He hopes to complete the modernization process next year.
In making these changes, and advancing others, Tozer has shown patience while keeping his eye on the ball.
“I think Ted is doing a great job,” said former Ginnie Mae president Rob Couch. He noted that all organizations need “refreshing” at some point. “Ted has moved cautiously with a keen view that the changes not screw up a good thing.”
Ginnie Mae MBS issuance totaled $465 billion in FY 2013 (which ended Sept. 30), up from $388 billion in FY 2012.
Originations and MBS issuance are expected to decline going forward and Tozer realizes that Ginnie Mae issuers are going to be cutting staff and making other adjustments to their businesses.
He also is aware the agency faces “too big to fail” exposure because 20 of its top issuers are responsible for 85% of Ginnie Mae’s servicing.
Most of these issuers are regulated by the banking agencies. But many issuers are selling their Ginnie Mae servicing to nonbank companies that are not subject to much regulatory scrutiny.
That is one reason Ginnie Mae is building up its monitoring and risk units so it can spot MBS issuer/servicers who may be getting into trouble and possibly prevent another Taylor, Bean & Whitaker collapse.
The risk unit with its nine members is developing a scorecard of factors that “tend to correlate with an issuer going out of business,” Tozer told NMN.
When it looks as if some of those traits are developing, he said, the monitoring folks will start spending more time with the issuer.
The agency also has 14 relationship specialists. Each is expected to keep an eye on 10 to 15 companies. They know the company's business plans and periodically check their financial statements. “If a lender is making changes to their business model, they can ask questions,” Tozer said. “They understand the business and the challenges they are facing.”
But it vexes Tozer that Congress won't allow Ginnie Mae to spend more of its revenue on staffing, or allow the agency to pay higher salaries for highly skilled professionals.
“Budget and salary constraints hamstring us from hiring quality people,” he said.
As a former secondary market executive at National City Mortgage, Tozer knows the ins and outs of pipeline hedging, loan delivery and other facets of the trade.
But at the current pay scales, he feels he can't recruit candidates with multiple skill sets. They have to hire several people to cover all the bases.
“People at Ginnie Mae are dedicated and doing a great job,” Tozer said. But he would sleep better if Ginnie could hire more experienced professionals.
