Ginnie Mae mulls permanent credit facility for nonbanks

Government guarantor Ginnie Mae is in the process of figuring out how to set up a permanent credit facility for nonbank lenders.

Ginnie took a stab at creating a temporary program aimed at assisting issuers having trouble during the pandemic, dubbed the Pass-Through Assistance Program, or PTAP, but "it was not perfect" and "had a lot of limitations," Alanna McCargo, Ginnie Mae's president noted, speaking at the Bipartisan Policy Center Tuesday.

Taking lessons learned, the agency is in the process of collaborating with partners, including the U.S. Treasury, "to figure out how we could support a more robust facility for the nonbanking sector," McCargo said.

"We haven't figured it out yet, but I believe speaking for myself [this is] probably one of the biggest things we need to figure out, we do not need to enter another downturn and not know how to support these institutions," she said. "These institutions are incredibly important to the system and the constituents that they serve, so I think we just have to figure out what that's going to look like." 

Creating a permanent credit facility may also insulate Ginnie Mae from situations where it is pushed to seize servicing portfolios from failed companies. Industry stakeholders have previously expressed concern that a lack of liquidity among Ginnie Mae issuers could push some out of business, and if there is no one to buy their assets, Ginnie will have to put the servicing books of nonbanks on its own balance sheet.

The agency's president called nonbank liquidity "the biggest challenge of our time" which has been exacerbated by stymied purchase activity and a lack of refinances, thus creating "huge stress on the system."

McCargo also touched upon a potential idea to get banks more involved in the mortgage sector  by incentivizing them to invest into the agency's environmental, social and governance (ESG) bonds for CRA credit. 

The agency has pitched this idea to regulators that are currently rebuilding the Community Reinvestment Act framework.

"I believe a lot of banks do have ESG reports that are coming out and programs that they're trying to do, so I think there's an opportunity within CRA to figure out a way to give banks credit for that," she said. "We're hopeful that the rulemaking will include [this] because we think it will be a great driver of more production."

McCargo also mentioned the agency is making a push internally to increase its headcount after years of being "woefully under-resourced."

"There's a lot of capacity we need to build so that we can [manage our portfolio] very well because that matters to the taxpayers," Ginnie Mae's president said. "We've gotten a ton of support from Secretary Fudge and President Biden and we have made some strides on increasing our budget. We have a lot more to do there."