Secondary Market Preparing for Potential Volume Shift

WE’RE HEARING at the Mortgage Bankers Association’s National Secondary Market Conference that with many housing finance indicators and forecasts suggesting a downshift in refinancing and a modest pickup in purchases on the way, market participants do not want to be caught unprepared.

With many outlooks suggesting that the latter will not make up for the loss in the former, this could mean any overall drop in volume when it comes to mortgage-backed securities as well as loans, particularly for government and government-sponsored entities positioned for possible reform.

This is among the reasons why Ginnie Mae is looking into whether it would be a good idea to look now at whether it would be a good idea to combine Ginnie Mae I and Ginnie Mae II securities programs.

Ginnie Mae president Ted Tozer wants the government agency to be "a good partner with everybody," however policymakers choose to use it, and among other things this means ensuring it continues to be effective in its current role as a strong provider U.S. housing market liquidity, regardless of the market environment.

Both the move and the potential problem it is designed to address are by no means certainties, he said.

"It is by no means a given," but it is "important to look at," said Tozer.

Ginnie Mae is set to continue to solicit a wide range of feedback from groups that include the MBA and the Securities Industry and Financial Markets Association about the potential pros and cons related to the move, as well as how it might be accomplished should the former outweigh the latter, he said.

"The liquidity issue is not here today," Tozer said, but he would like to get ahead of the game and the potential problem while there is “plenty of volume.

“We can do a lot of things now,” he said.

When asked if it fair to draw some parallels with Ginnie’s consideration of this plan, and MBA president and CEO David Stevens’ renewed push for a combination of Fannie Mae and Freddie Mac securities to head off liquidity issues while the market has volume and profit, Tozer said, “to some degree.”

Since the potential consolidation in Ginnie securities would be an internal move within a single organization rather than two separate ones, he believes it could be a comparatively simpler process.

In other MBS news, W.J. Bradley plans to privately place a jumbo deal this year.

Bonnie Sinnock is managing editor of National Mortgage News and editor of Origination News. She has been covering the mortgage industry since 1995.