The thing Michael Bright is most proud of as interim head of Ginnie Mae is his effort to combat churn in Department of Veterans Affairs-guaranteed mortgages. Rising cashout refinancing of VA loans risked turning investors off and potentially signaled predatory or misleading behavior by lenders.
He says this effort was greatly helped by enlisting, and listening to, lawmakers, so that instead of slapping the agency down when it policed the mortgage industry, they were “cheering us on.”
Bright is bringing this approach to his new role as head of the Structured Finance Industry Group. In the past, SFIG has struggled to reconcile the divergent interests of its 350 members; the role Bright assumes on Jan. 21 has been vacant for the past six months. He sees the trade group’s most fundamental challenge to be demystifying securitization for policymakers. “There’s a lot of mystique and misinformation all around, and this is an opportunity to really solve that,” he said. This will require “more honest, two-way dialogue.”
While this may feel like a risk, “I feel it’s a risk worth taking, and it’s going to pay a lot of dividends,” he said.
Bright joined Ginnie Mae in July 2017 and his nomination as president had been pending since May 2018; his departure on Jan. 16 prolongs the permanent leadership gap at the agency. (Maren Kasper, current executive vice president of Ginnie Mae, will now serve as acting president.)
He says he’s moving to SFIG because he “got comfortable with the idea that I can do as much, if not more, of the things I care about there as much as anywhere else,” adding, “it happened to be the right time.”
What follows is a transcript of a telephone interview, edited for length.
Michael Bright, president of the Government National Mortgage Association (Ginnie Mae) nominee for U.S. President Donald Trump, speaks during a Senate Banking Committee confirmation hearing in Washington, D.C., U.S., on Tuesday, July 24, 2018. If confirmed, Bright would take over for former Ginnie Mae President Ted Tozer, who stepped down at the beginning of the current White House administration. Photographer: Andrew Harrer/Bloomberg
Andrew Harrer/Bloomberg
Why leave Ginnie Mae?
It happened to be the right time.
I kind of bumped into [the job] through some people I know who have relationships with SFIG. The first interview was with a whole bunch of people I respect; the idea of working together in a more official role was exciting. As the conversation went on, I got comfortable with the idea that I can do as much, if not more, of the things I care about there as anywhere else.
What was your biggest accomplishment at Ginnie Mae?
The VA loan churn is the issue that definitely stands out. We got a bipartisan group of congressmen to pass an amendment [restricting cashout refinancing] and it was passed into law. That sent a strong message to the industry that if your performance is an outlier, you don’t get to be part of a multi-issuer pool. One bad actor can’t bring down price performance for everyone. I hope that is a lesson that future Ginnie Mae presidents copy, paste and repeat whenever bespoke issues come up. Multiple issuers using a single pool all rely on effective policing and clear rules, and someone who is willing to play referee. Ginnie Mae hadn’t been doing that for awhile.
A lot of times [regulators] think they’re going to police the industry and Congress is going to slap them down. We got ahead of things and Congress cheered us on, especially Sen. Warren and Sen. Tillis. I hope that can continue in the future. I think as an agency head I tried very hard to have a dialogue with policymakers, I listened to their concerns, I explained our objectives. I don’t think regulators do that enough. A lot of regulators see Congress as a distraction, a noise; there needs to be more honest, two-way dialogue.
I plan take that approach to the SFIG.
What do you see as SFIG’s biggest challenge?
I’d like to find a way for SFIG to not just be always corralling the industry — though that’s a big part of the job. Trade associations all have the same problem, whether it’s issuers versus investors, big banks versus small banks, or banks versus nonbanks. With an organization as large as SFIG, the most fundamental challenge is how do we serve as a bridge for the entire securitization industry, private-label securities and agencies, to have a positive impact on the economy and long-term financial stability.
I really think we have two groups of people talking past each other, market participants and [policymakers], and the more sophisticated [the subject] on the market participant side, the more mysterious it is for policymakers.
Being transparent and honest may feel like a risk, but I feel it’s a risk worth taking, and it’s going to pay a lot of dividends. It will help people. We need to demystify each side. There’s a lot of mystique and misinformation all around, and this is an opportunity to really solve that.
Which areas need the most transparency?
The mortgage market is one of most mysterious [to policymakers]. Also derivatives, the use of derivatives and all of the mechanics of securitization. I was in financial markets for almost a decade trading these things, and there are large aspects of financial markets I don’t fully understand.
The more that policymakers and their staff understand, the better they are able to call balls and strikes in an accurate and effective way. That’s the right place for regulators, legislators and the industry to be, when everyone understands how all of the pieces work and can have an objective, honest conversation instead of talking past each other.
How much is the government shutdown impacting the mortgage market?
Ginnie Mae will be OK; much of what Ginnie does is an essential function. I don’t want to talk too much because I’ve handed off the reins. If things could get resolved in the next couple of weeks, that would be great. As far as Ginnie Mae’s core job, it has been going on like normal. We released data for December this week, as usual. On the 20th P&I will be paid. I do worry that, over the very long term, morale will be degraded. But we are not there yet.
In a Senate hearing, Director Sandra Thompson said a raise to the required income threshold provided to affordable housing was on the table, while housing regulators also faced questions related to property insurance hikes and title insurance waivers.
