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Government National
Mortgage Association
ANNUAL REPORT 2013
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OUR GUARANTY MATTERS 1
S M
F 45 , Ginnie Mae has been leveraging he combined resources o he U.S. Governmen andhe privae secor o inuse capial ino he Naions housing finance marke and assis millions o low-and moderae-
income households o find an affordable place o live.
Ginnie Maes srong oundaion, based on sound financial discipline, has posiioned he organizaion or long-erm
success and growh and conribued o is saus as a srong, successul, independenly financed, wholly owned
corporaion o he U.S. Governmen. Tis enables Ginnie Mae, hrough is numerous programs, o suppor housing
liquidiy around he counry a no cos and limied risk o axpayers. Moreover, Ginnie Mae unds is programs
primarily hrough user ees and remained highly profiable, even during he recen financial crisis and is afermah.
Ginnie Mae relies on a clear and simple model ha allows he Federal Governmen and he privae secor o workcollaboraively in suppor o homeowners, reners, morgage lenders, and invesors. Te susainabiliy o his model
lends sabiliy, consisency, and accounabiliy o is morgage-backed securiies programs, which allow or flexibiliy
and adapabiliy in an ever-evolving housing marke.
As his marke coninues o sabilize and recover, Ginnie Mae is building or he uure. By coninuing o inves in is
echnology and inrasrucure, augmen is risk-managemen pracices, and oser a sakeholder-cenric organizaion,
Ginnie Mae is solidiying is commimen o delivering op securiizaion capabiliies and operaional experise ha
atrac global capial o Americas housing finance sysem.
I commend Ginnie Mae on is coninued success.
Shaun Donovan
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2 GINNIE MAE ANNUAL REPORT 2013
December 6, 2013
Te Honorable Shaun Donovan
Secreary
U.S. Deparmen o Housing and Urban Developmen
451 7h Sree, SW
Washingon, DC 20410
Dear Mr. Secreary:
As he end o anoher year approaches, I am happy o repor ha Ginnie Maes oundaion and business model remain
srong, susainable, and profiable as we coninue o build or he uure.
Ginnie Maes srong oundaion is grounded in financial discipline, sound risk managemen processes and a growingeam o leading morgage and capial markes proessionals organized or long-erm success and growh. Our coninued
profiabiliy as a sel-financed governmen corporaion is a direc resul o effecive resource deploymen, careul expense
managemen, and producs ha atrac invesmen capial rom all over he world.
Our simple and unique business provides sabiliy o he U.S. housing finance sysem in good imes and bad. Ginnie Maes
ull-aih-and-credi backing, combined wih he flexibiliy o our morgage securiizaion producs, atracs a growing
number o morgage lenders o our programs. We require our lender parners o proec axpayers rom risk exposure by
having skin in he game and reaining financial responsibiliy or he securiies hey issue.
Te resuls o our proven business model are clear. Ginnie Mae has profiably guaraneed $2.0 rillion in morgage-
backed securiies since 2009, providing housing opporuniies or 8.8 million households. During he pas year alone, weguaraneed $460 billion in securiies, ranslaing o nearly 2.1 million homes across he counry.
We coninue o make significan invesmen in our uure by modernizing our echnology and daa inrasrucure and
providing loan-level collaeral daa ha our invesor communiy has come o expec. esponding o invesor needs is jus
one o he ways in which we are osering a sakeholder-cenric organizaion ha balances he ineress o borrowers and
lenders and provides leadership on housing reorm issues.
In imes like hese i becomes increasingly clear ha Ginnie Maes guarany maters. I ake remendous pleasure in
presiding over such a dynamic organizaion ha coninues o successully balance he relaionship o he privae marke
wih he U.S. Governmen, delivering leading securiizaion capabiliies and operaional experise in suppor o Americas
housing finance sysem.
Sincerely,
Teodore W. ozer.President
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OUR GUARANTY MATTERS 3
CONTENTS
01 Ginnie Maes Foundation is Strong.................................
MissionandPurpose ....................................... .................................
TodaysGinnieMae................................... ........................................
GinnieMaesHistoryandDevelopmentofthe
Mortgage-BackedSecurity ....................................... ....................
SupportingMortgageLiquidityandProtecting
theTaxpayer .................................. ........................................ .............
GinnieMaesRiskModel ...................................... ...........................
GinnieMaesProductsandPrograms .....................................
PrudentUseoftheStrengthoftheFullFaithand
CreditGuaranty ................................... ....................................... .....
EnsuringaLiquidMarket .................................... .........................
02 Financial Highlights and Managements
Discussion and Analysis ...........................................................
Revenues...................................................... ............................................
Expenses...................................................... ............................................
03 Audit Report of Ginnie Maes FY 2013 and
FY 2012 Financial Statements...........................................
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4 GINNIE MAE ANNUAL REPORT 2013
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OUR GUARANTY MATTERS 5
Mission and Purpose
Te Governmen Naional Morgage Associaions (Ginnie Mae) mission and
purpose is o bring global capial ino he housing finance sysema sysem
ha runs hrough he core o our Naions economywhile minimizing risk o
he axpayer. Te simple bu srong business model ha Ginnie Mae has buil
highlighs he power o he Federal Governmen and he privae secor workingogeher. Trough an efficien and low-cos securiizaion model, Ginnie Mae
provides liquidiy and ulfills he needs and demands o various marke segmens
by leveraging he ull aih and credi o he Unied Saes o access global capial.
Esablished by Congress in 1968 as a Governmen-owned corporaion,
Ginnie Maes sauory purpose is o ensure ha adequae capial and liquidiy are
available o finance single amily homes, muliamily housing, renal housing and
healhcare aciliies hroughou all marke condiions. Ginnie Mae successully
played a counercyclical role or housing finance in he secondary morgage
marke during he wors economic crisis since he Grea Depression. Te recen
housing crisis demonsraed he criical imporance o governmen-guaraneed
securiies as he privae marke rereaed. oday, Ginnie Mae
remains a sel-financing, wholly-owned U.S. Governmen
corporaion wihin he Deparmen o Housing and Urban
Developmen.
Ginnie Mae does no originae morgage loans, nor does i
buy or sell securiies or loans or invesmen purposes. aher,
i guaranees invesors he imely paymen o principal and
ineres on securiies backed by loans insured or guaraneed
by oher Federal Governmen housing agencies. In doing so, Ginnie Mae sandsin he ourh loss posiion behind hree layers o risk absorpion, including
borrowers equiy, Federal Governmen loan-level morgage guaranee programs,
and he corporae resources o he lender ha issues he morgage-backed securiy
(MBS). Te srengh, simpliciy, and agiliy o Ginnie Maes unique mission and
business model serve o help mainain a well-uncioning morgage marke while
minimizing axpayer risk.
01G M
F
S
The strength, simplicity, and agility of
Ginnie Maes unique mission and business
model serve to help maintain
a well-functioning mortgage market
while minimizing taxpayer risk.
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6 GINNIE MAE ANNUAL REPORT 2013
Ginnie Mae reaffirmed its leadership
position by sustaining its steady support
of the housing market, playing a vital role
in our Nations economic recovery.
Ginnie Maes business model coninues o atrac boh
inernaional and domesic atenion. Tis model has
provided an uninerruped, reliable invesmen vehicle
across he global markes or MBS invesors who rely on
Ginnie Maes saey and soundness. Ginnie Mae is also
recognized or is definiive presence and role wihin he
Naions housing marke oday and or he role i is ready o
play in he uure.
In Fiscal Year (FY) 2013, Ginnie Mae reaffirmed is leadershipposiion by susaining is seady suppor o he housing
marke, playing a vial role in our Naions economic recovery.
Tis pas year, Ginnie Mae also esablished marke sandards
or securiies ransparency and disclosure, enhanced risk
managemen and echnology, and exended organizaional
capabiliies o mee he needs o he capial markes oday
and or uure success.
Todays Ginnie Mae
As he housing marke begins o show signs o sabilizaion,Ginnie Maes conribuion hroughou he crisis sands
ou as a model or he secondary morgage marke and or
naional housing policy. Ginnie Maes undamenal purpose
o suppor affordable financing or housing in America
by linking global capial markes o he Naions housing
markes coninues. Te demand or is producs and he need
or he efficien, low-cos securiizaion model i provides
have increased. Te number o lenders issuing Ginnie Mae
securiies is growing. Ginnie Maes increased invesmen in
echnology, inrasrucure, and saffing experise has ensured
ha he expanding needs o he marke are me.
Ginnie Maes History and Development of
the Mortgage-Backed Security
Ginnie Maes origins sem rom he Governmens effors
o help revialize he U.S. housing marke during he Grea
Depression. Te Federal Naional Morgage Associaion
(Fannie Mae) was charered in 1938 o creae a morgage
marke by purchasing FHA-insured loans rom lenders in
order o suppor he flow o credi and encourage lenders o
make morgage loans.
Te Housing and Urban Developmen Ac o 1968 spli
Fannie Mae ino wo separae corporaions: (1) he curren
Fannie Mae, o purchase convenional (non-Governmen-
backed) morgages ha conorm o specific underwriing
sandards; and (2) Ginnie Mae, o ocus on creaing an
MBS marke ha provides a guarany backed by he ull
aih and credi o he Unied Saes. Te guarany assures
invesors hey will receive imely paymen o monhly
principal and ineres (P&I) on MBS secured by pools o
loans guaraneed or insured by he Federal Governmen.
Tis guarany is invoked only in he rare occurrence whenan Issuer1 deauls on is obligaion o make ha imely
monhly paymen o P&I.
1 Ginnie Mae uses the termIssuerto refer to the lenders that issueor service securities in its program. Unlike the Government-sponsoredenterprises (GSEs), Issuers are legally responsible for paying thesecurity holders, administering the securities, and servicing themortgages.
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OUR GUARANTY MATTERS 7
Te creaion o Ginnie Mae eliminaed he U.S. reasurys
need o provide unding or Federal Governmen loan
programs. oday, Ginnie Mae remains he primary financing
mechanism or all Governmen-insured or Governmen-
guaraneed morgages. Hisorically, morgage raes and
availabiliy o unds varied by region, and individual
morgages were rarely sold on he secondary marke. Lendershad cusomarily reained heir morgage loans in porolios,
which limied he number o new loans ha could be
originaed.
In 1970, Ginnie Mae addressed hese impedimens o new
loan originaion by designing and pioneering he very firs
MBS, which allowed or many loans o be pooled and used
as collaeral in a securiy ha could be sold in he secondary
marke. Te explici Governmen guarany o he imely
receip o P&I on he behal o he Issuers made hese
securiies especially atracive o invesors. By channeling
invesmen capial rom global markes, Ginnie Mae MBS
suppor housing finance and neighborhoods across he
Naion and inuse liquidiy ino he housing finance sysem.
Supporting Mortgage Liquidity and
Protecting the Taxpayer
Ginnie Mae only guaranees he perormance o he Issuer.
Ginnie Mae does no ake credi or deaul risk on he
underlying loans. Te U.S. agencies insuring or guaraneeing
he underlying morgages include he Federal Housing
Adminisraion (FHA), he Deparmen o Housing andUrban Developmens (HUD) Office o Public and Indian
Housing (PIH), he Deparmen o Veerans Affairs (VA)
Home Loan Program, and he Deparmen o Agriculures
(USDA) ural Housing Service Single Family, Muliamily,
and Communiy Faciliies guaraneed loan programs (ural
Developmen, or D). Ginnie Mae remains a sel-financing,
wholly owned U.S. Governmen corporaion wihin HUD.
Issuers pool Governmen-backed morgage loans, issue
he MBS, and service and manage he MBS porolio and
he underlying loans. Ginnie Mae, in urn, guaranees he
imely paymen o principal and ineres o he invesors.
In exchange or his guarany, Issuers pay Ginnie Mae a ee
rom he spread beween he ineres rae paid by morgage
borrowers and he ineres rae paid o MBS invesors.
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8 GINNIE MAE ANNUAL REPORT 2013
Issuers in he Ginnie Mae program are qual ified insiuions
ha are individually approved and closely moniored
by Ginnie Maes deailed risk managemen ramework.
Ginnie Mae Issuers are diverse in size and geography and
include morgage companies, commercial banks, hrifs,
credi unions, and sae housing finance agencies (HFA)
(see Figure 1).
Invesors seek he Ginnie Mae guarany, coupled wih
an expeced rae o reurn higher han U.S. Governmen
securiies. Te Ginnie Mae MBS is highly liquid and atracive
o domesic and oreign invesors. Tis liquidiy is passed
on o lenders who can use he proceeds rom new securiy
issuances o make new morgage loans.
Acive invesor ineres ensures he capial flow o Ginnie Mae
guaraneed securiies (as depicted in Figure 2) which helpso lower financing coss, which in urn suppors accessible
and affordable renal housing and homeownership. Because
he securiies are backed by he ull aih and credi o he
U.S. Governmen, he invesor marke is larger and broader,
and financing is available a lower morgage ineres raes,
which benefis borrowers and reners.
Ginnie Maes Risk Model
Ginnie Mae is a mono-line business ha insures only Issuer
perormance. Tere are hree levels o proecion ha mus
be exhaused beore he Ginnie Mae guarany is a risk:
homeowner equiy, he insurance provided by he Federal
Governmen agency ha insured he loans, and he corporae
resources o he lender ha issued he securiy. Ginnie Mae
is in he ourh and final loss posiion (Figure 3). An Issuer
mus exhaus is corporae resourcesusually hroughbankrupcybeore Ginnie Mae will ake on he Issuers
role and pay on is guarany o invesors. By insuring only he
perormance o Issuers in heir servicing responsibiliies and
requiring hem o make principal and ineres paymens
o invesors unil hey can no longer do so, Ginnie Mae
significanly reduces axpayer exposure o r isk.
Even i an Issuer ails o mee is obligaions, Ginnie Mae
does no necessarily suffer a loss. Insead, i acquires
conrol o he Issuers morgage servicing righs and places
he porolio wih a financially sound Issuer. I is hrough
invesors confidence in his susainable business model ha
Ginnie Mae ensures ha capial coninues o flow o he
Naions housing finance sysem.
Te credi exposure o Ginnie Mae is limied o counerpary
risk because Ginnie Mae guaranees ha an Issuer will
mee is obligaions. Ginnie Mae manages his risk hrough
FIGURE 1: GINNIE MAE ISSUERS BY
INSTITUTION TYPE as of September 30, 2013
n MortgageBanks
n SavingsandLoans
n CommercialBanks
n MutualSavingsBanks
n CreditUnions
n Others
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OUR GUARANTY MATTERS 9
FIGURE 2: CAPITAL FLOW OF GINNIE MAE GUARANTY SECURITIES
Ginnie Maes Risk Model
FIGURE 3: PROTECTING THE GINNIE MAE GUARANTY
FHA, VA, RURALDEVELOPMENT, OR PIHInsure or Guarantee Loans
GINNIE MAEGuarantees Investors
Timely Payment
of Principal and Interest
on Securities
LENDERSOriginate Loans under
Guidelines of
Federal Credit Programs
ISSUERS(Often the Lenders or
Their Affiliates) Pool Loans
and Create Mortgage-
backed Securities
INVESTORSPurchase Securities and
Receive Monthly Passthrough
of Principal and Interest
from Borrowers
*VA covers the first 25% of credit loss, USDA-RHS covers the first 90%, and FHA covers 100%. Coverage of foreclosure expenses varies by agency; uncoveredexpenses can be substantial.
**Private Mortgage Insurance (PMI) is only required for loans with > 80% LTV; loans with 80% LTV have no PMI.
***Private Credit Enhancement is the result of a recent FHFA mandate on Fannie Mae and Freddie Mac requiring them to establish risk-share instruments withprivate enterprises or investors.
FIRST $ LOSS
LAST $ LOSS
RELATIVE LOSS POSITION
HomeownerEquity
GovernmentAgencyCredit
Enhancement
CorporateResourcesof Issuer/Servicer
Ginnie Mae
FIRST $ LOSS
LAST $ LOSS
RELATIVE LOSS POSITION
HomeownerEquity
Private MortgageInsurance
Private CreditEnhancement
Fannie/Freddie
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10 GINNIE MAE ANNUAL REPORT 2013
is comprehensive Issuer approval process and ongoing
monioring procedures, boh o which are a par o a muli-
layer risk managemen ramework.
Ginnie Maes Products and Programs
Ginnie Mae offers reliable soluions ha mee he needs o
a broad consiuen base o borrowers, lenders and invesors
and provides sufficien flexibiliy o respond o marke
changes. A he core o is business model and produc
offerings is he simple pass-hrough securiy, which comes in
he orm o wo produc srucuresGinnie Mae I MBS and
Ginnie Mae II MBS. Characerisics o each are summarized
in he ollowing able.
Te Ginnie Mae I Single Issuer MBS is he oundaion
o is MBS program. In recen years, however, he
Ginnie Mae II MBS has generaed increased demand and
surpassed he Ginnie Mae I MBS in erms o issuance
volume. In FY 2013, he Ginnie Mae II program accouned
or approximaely 82 percen o Ginnie Maes MBS issuance.
Tis is he resul o invesors growing preerence or muli-
Issuer pools, as well as increased appeie or larger pools
wih diverse collaeral characerisics.
Te Ginnie Mae MBS also serve as he underlying
collaeral or muliclass producs, such as eal Esae
Morgage Invesmen Conduis (EMICs), Callable
russ, Plainum Securiies, and Sripped Morgage-Backed
Securiies (SMBS). Ginnie Mae also guaranees he imely
paymen o principal and ineres o hese producs. Tese
srucured ransacions allow he privae secor o combine
and resrucure cash flows rom Ginnie Mae MBS ino
securiies ha mee unique invesor requiremens or yield,
mauriy, and call-opion eaures.
Muliclass producs are srucured or offering in he
public markes by sponsors. Tese sponsors are approved
Ginnie Mae securiies dealers in he EMIC program, and
deposiors in he plainum program, who have wide access o
global invesors. By managing he ongoing relaionship wih
GINNIE MAE I MBS GINNIE MAE II MBS
Single-issuer pools Single- or multiple-issuer pools
Note rates on underlying mortgages are fixed andall the same
Multiple note rates on underlying mortgageslimited to a range of 50 basis points (0.25 to 0.75
above the pass-through interest rate)
Acceptable collateral:
To Be Announced (TBA)eligible: Single Family
Level Payment Mortgages
Non-TBA eligible: Buydown Mortgages,
Graduated Payment Mortgages, Growing Equity
Mortgages, Serial Notes, Manufactured HomeLoans, Project Loans, Construction Loans
Acceptable collateral:
TBA eligible: Single Family Level Payment
Mortgages, including up to 10 percent BuydownMortgages
Non-TBA eligible: Adjustable-rate Mortgages,
Graduated Payment Mortgages, Growing EquityMortgages, Serial Notes, Manufactured Home
Loans, Home Equity Conversion Mortgage(HECM) Loans
Timing of payments: 15th of the month Timing of payments: 20th of the month
Larger pool size
More demographically and geographically diverse
Customizable pools
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OUR GUARANTY MATTERS 11
REMICs CALLABLE TRUSTSPLATINUM
SECURITIESSMBS
Investment vehicles
reallocate pass-through
cash flows from
underlying mortgageobligations into a
series of different
bond classes, known
as tranches, which vary
based on term and
prepayment risk.
Investors can redeem
or call a security
prior to its maturity
date under certainconditions to hedge
against fluctuating
interest rate
environments.
Investors can hold
multiple pools of MBS
to combine them into
a single Ginnie MaePlatinum Certificate.
Custom-designed
securities that redirect
MBS principal and/or
interest cash flows tomeet investors specific
objectives. Ginnie Mae
guarantees the timely
payment of principal
and interest on each
class of SMBS.
invesmen banks and insiuional invesors, Ginnie Mae
suppors muliple producs ha mee he needs o global
capial marke paricipans and atrac financing o he U.S.
housing marke.
Tis wide range o Ginnie Mae securiy producs finances
he diverse single amily and muliamily lending iniiaives
provided by he Governmens housing agencies. Tose
Governmen-insured and guaraneed lending programs
align wih Ginnie Maes our MBS programs. Tese programs
are designed o serve a variey o loan financing needs and
differen Issuer originaion capabiliies. All loans in each o
hese programs are insured or oherwise guaraneed by he
Governmen, which minimizes risk o Ginnie Mae.
Ginnie Mae supports multiple products
that meet the needs of global capital
market participants and attract financing
to the U.S. housing market.
Single Family Program:Te majoriy o Ginnie Mae securiies
are backed by single amily morgages predominanly
originaed hrough FHA and VA loan insurance programs
(61.9 percen and 32.9 percen, respecively). In FY 2013,
96.7 percen o FHA fixed-rae single amily loans and
98.0 percen o VA fixed-rae single amily loans were placed
ino Ginnie Mae pools. As o he end o FY 2013, invesors
held $1.3 rillion in ousanding single amily Ginnie Mae
MBS. Te Single Family Program suppors purchase
morgages, loans ha are modified o suppor loss miigaion
programs, as well as morgage refinancing.
Wihin he Single Family MBS Program, he argeed
Lending Iniiaive (LI) provides incenives or lenders o
increase loan volumes in radiionally underserved areas.
Esablished in 1996, he LI program offers discouns
ranging rom one o hree basis poins on Ginnie Maes
six-basis-poin guarany ee, depending on he percenage
o LI-eligible loans wihin he pool or loan package. Te
reduced ee moivaes lenders o originae loans in hese
disressed areas.
Multifamily Program: Ginnie Maes Muliamily MBS
Program enables lenders o reduce morgage ineres raes
paid by propery owners and developers o aparmen
buildings, hospials, nursing homes, assised living
aciliies, and oher ypes o housing. Tese lower ineres
raes provide he necessary incenive or many developers
o consruc or subsanially rehabiliae new projecs.
Te imporance o muliamily financing is growing as he
populaion ages, aciliies need renovaion, and he demand
or memory care services increases. ailored or many
propery ypes and financing scenarios, Ginnie Maes
Muliamily MBS Program reaches diverse segmens o
he U.S. renal housing marke and finances projecs ha
sabilize local economies and bring jobs o communiies
across he counry. Te sophisicaed and flexible srucure
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12 GINNIE MAE ANNUAL REPORT 2013
o he program provides Ginnie Mae wih a compeiive
advanage over oher muliamily financing offerings in he
indusry. Tis advanage is due o our key characerisics
ypically atribued o governmen loan programs: lower
ineres raes on loans; higher loan-o-value raio or
borrowers; all-in-one consrucion o permanen loan
originaion; and an advanageous capial source or healh
care properies, including nursing homes and hospials.
In FY 2013, Ginnie Maes Muliamily MBS porolio
increased o $79.8 billion, compared o $67.4 billion in
FY 2012, helping o finance 1,854 aparmen building
loans, 46 hospial loans, and 690 nursing home loans.
Home Equity Conversion Mortgage (HECM) MBS (HMBS)
Program: Ginnie Maes HECM securiies program provides
capial and liquidiy or FHA-insured reverse morgages.
HECM loans can be pooled ino HMBS wihin heGinnie Mae II MBS program. Tey also can serve as collaeral
or EMICs backed by HMBS (H-EMICs). Ginnie Mae
has been a pioneer in he developmen o a liquid securiies
marke or reverse morgages, providing senior ciizens wih
access o heir home equiy during challenging economic
imes. In FY 2013, Ginnie Maes HMBS porolio reached
$44.6 billion, compared o $36.9 billion in FY 2012.
Ginnie Mae has been a pioneer in the
development of a liquid securities market
for reverse mortgages, providing senior
citizens with access to their home equity
during challenging economic times.
Manufactured Housing (MH) Program: Ginnie Maes MH
program provides financing or and allows he issuance
o pools o loans insured by FHAs ile I Manuacured
Home Loan program or manuacured home loans ha do
no include land as collaeral. Tis program wen hrough
significan changes in suppor o he Housing and Economic
ecovery Ac o 2008 (HER).
Prudent Use of the Strength of the Full
Faith and Credit Guaranty
Te ull aih and credi guarany separaes Ginnie Mae
rom all oher MBS g uaranors, including Fannie Mae and
Freddie Mac. As ederally charered secondary marke
paricipans, hese Governmen-sponsored enerprises
(GSEs) share many similariies wih Ginnie Mae. Tese
organizaions each provide liquidiy in he secondary
morgage marke, suppor housing finance opporuniies,
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OUR GUARANTY MATTERS 13
GINNIE MAE GSEs
Governance Wholly owned Government corporation Under Government conservatorship sinceSeptember 2008 but remain publicly tradedcompanies (not on NYSE)
Government
Guaranty
Explicit guaranty to investors Implicit guaranty to investors
Business
Activities
Does not purchase loans, nor does it buy, sell,or issue securities as part of its regular courseof business, but approves private lendinginstitutions to issue MBS for which Ginnie Maeprovides the guaranty.
Purchase loans, and they buy, sell, and issuesecurities.
Rates and Terms Trade at a higher price than comparable GSEMBS, thus providing a lower interest rate toborrowers
Trade at lower prices relative to Ginnie MaeMBS
Functions Guaranty and bond administration of MBS Only Loan-level guaranty and bond administration ofMBS; and management of investment portfolioof whole loans and MBS
Risk Limited risk to Ginnie Mae. Issuer/Servicer Risk.Issuers must have capital to advance paymentsof principal and interest to investors when aloan defaults. Government agencies insurance(e.g., FHA, VA, RD, PIH) repays Issuers forprincipal (not Ginnie Mae). Also, Issuers areresponsible for unreimbursed credit losses forthe securities they issue.
Significant risk to the GSEs. Borrower CreditRisk, Interest Rate Risk, and Servicer Risk. TheseGSEs guarantee full repayment of principalto investors when a loan defaults. Also, theseGSEs are responsible for the risk of loss on theirsecurities.
Eligible Collateral Government-backed loans (FHA, VA, RD, PIH) Conventional Loans
and guaranee MBS by ensuring he imely paymen
o principal and ineres o invesors. Teir srucure
and business models, however, differ in a number o
ways, including mos noably heir guarany o he loans
underlying he MBS.
Te key differences beween Ginnie Mae and he GSEs are
summarized in he able below.
Ensuring a Liquid Market
Te recovery o he housing marke depends on a reliable
supply o liquidiy ha only a srong capial marke can
provide. Te consisen perormance o Ginnie Maes MBS
producs has been essenial o providing his liquidiy. Issuers
know ha Ginnie Mae securiies provide atracive pricing
and are an imporan asse class or many invesors. Te
avorable pricing on securiies, enabled by he Ginnie Mae
guarany, is ulimaely passed on o many homeowners
and reners in he orm o lower ineres raes and more
atracive leasing erms. In addiion, hese securiies provide
he financing necessary or all Federal Governmen loan
guaranee programs ha suppor sae and affordable housing.
Ginnie Maes creaion o pass-hrough securiies also led o
he esablishmen o he o Be Announced (BA) marke,
a criical eaure o he secondary morgage marke allowing
or uure lending commimens and valuaion. Invesors in
BA securiies know ha he erms and condiions o he
securiy are consisen and he underlying morgage loans
are comprised o relaively homogeneous collaeral. Tis
innovaive process enables lenders o lock in a rae or he
morgages beore closing, which aciliaes he availabiliy
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14 GINNIE MAE ANNUAL REPORT 2013
o affordable morgages o millions o prospecive
homeowners. Alhough esablished many years ago, a
significan porion o he volume o MBS raded in he
marke oday coninues o be in he orm o BA securiies,
which are conracs or he purchase or sale o a ype o MBS
securiy ha will be delivered a a uure agreed-upon dae.Tough he specific loans, pool numbers or he number o
pools ha will be delivered o ulfill he rade obligaion
or erms o he conrac are unknown a he ime o he
rade, he BA marke uses acceped parameers or loans
and pools o be delivered. Ginnie Maes BA-eligible MBS
enables morgage lenders o sell heir primary originaions
orward by securiizing he morgages or purchase in he
secondary marke.
Anoher segmen o he secondary morgage marke is
he non-agency, or privae-label securiies marke. Figure
4 shows he dramaic decline in he privae-label marke
over he pas several years and he consisen issuance o
agency MBS-hose backed by Ginnie Mae and he GSEs.
Te oal issuance o agency MBS during he firs hreequarers o calendar year 2013 remained a an elevaed
level o $1.29 rillion compared o he limied issuance o
privae-label MBS.
Alhough Ginnie Mae has mainained a significan share o
he MBS marke over he pas several years, mainaining a
high marke share is no is goal. Is goal is simply o suppor
he housing marke in a sae and efficien manner.
FIGURE 4: MARKET SHARE OF GINNIE MAE AND GSE SECURITIES
Calendar Years 2009 through 20132
0
200
400
600
800
1000
20132012201120102009
MBS ISSUANCE
($ BILLIONS)
nGinnie Mae
nFannie Mae
nFreddie Mac
nNon-agency
2 Source: Inside MBS & ABS. MBS issuance figures based on the 12 months of the calendar year for 2009 through 2012, and
for the first 9 months of calendar year 2013.
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OUR GUARANTY MATTERS 15
Ginnie Mae coninued o pos sable financial resuls during FY 2013. evenues
decreased by 1.7 percen o $1,225.1 million, down rom $1,246.6 million
in FY 2012. Expenses increased o $128.4 million in FY 2013, compared o
$86.0 million in FY 2012. However, Ginnie Mae recognized a provision or MBS
loss liabiliy o $422.7 million. Te provision or MBS loss liabiliy was $8.9 million
less han FY 2012 and he oal Losses rom credi impairmen o morgage loans
held or invesmen was $73.8 million less han FY 2012. As shown in able 1
on he ollowing page, Ginnie Mae achieved excess revenues over expenses (ne
profi) o $628.4 million, compared wih $609.6 million
in FY 2012. oal asses increased o $25.0 billion rom
$23.7 billion in FY 2012.
Te ousanding MBS porolio guaraneed by Ginnie Mae
increased by $115.7 billion in FY 2013, which led o
increased guarany ee revenues. In FY 2013, MBS guarany
ees increased o $870.9 million, up rom $779.4 million in FY 2012. Ineres on
morgage loans held or invesmen decreased o $116.4 million in FY 2013, downrom $279.8 million in FY 2012. However, U.S. Governmen securiies ineres
income increased rom $81.5 million in FY 2012 o $98.7 million in FY 2013.
In FY 2013, Ginnie Mae issued $464.7 billion in commimen auhoriy, a
14.4 percen increase rom FY 2012. Te $460.4 billion o MBS issued in FY 2013
represens an 18.6 percen increase rom FY 2012. Te ousanding MBS balance
o $1,457.1 billion a he end o FY 2013, compared o $1,341.4 billion in
FY 2012, resuled rom new issuances exceeding repaymens. FY 2013 producion
provided he capial o finance home purchases, refinances, or renal housing or
approximaely 2.1 million U.S. households.
able 1 also provides financial highlighs o Ginnie Mae over he pas hree years.
Te ollowing discussion provides inormaion relevan o undersanding
Ginnie Maes operaional resuls and financial condiion. I should be read in
conjuncion wih he financial saemens and noes in Secion III o his repor; he
financial saemens have received an unqualified audi opinion rom Ginnie Maes
02F
H
M
D
A
The outstanding MBS portfolio
guaranteed by Ginnie Mae increased
by $115.7 billion in FY 2013, which led to
increased guaranty fee revenues.
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16 GINNIE MAE ANNUAL REPORT 2013
TABLE 1: GINNIE MAE FINANCIAL HIGHLIGHTS Fiscal Years 2011 to 2013
2013 2012 2011
BALANCE SHEETS HIGHLIGHTS AND LIQUIDITY ANALYSIS(Dollars in Thousands)
FundswithUSTreasury
USGovernmentSecurities
OtherAssets
TotalAssets
TotalLiabilities
InvestmentofUSGovernment
TotalRPBOutstanding()
MBSLossLiability()andInvestmentofUSGovernment
InvestmentofUSGovermentasaPercentageofAverageTotalAssets
MBSLossLiabilityandInvestmentofUSGovernmentasaPercentageofRPB
CapitalAdequacyRatio()
HIGHLIGHTS FROM STATEMENTS OF REVENUES AND EXPENSES & PROFITABILITY RATIOS
Year Ended September 30
MBSProgramIncome()
InterestIncome-USGovernmentSecurities
TotalRevenues
MBSProgramExpenses () () ()
AdministrativeExpenses () () ()
FixedAssetAmortization () () ()
TotalExpenses () () ()
TotalRecapture(Provision)forLosses () ()
TotalOtherGains(Losses)() () () ()
ExcessofRevenuesOverExpenses
TotalExpenseasaPercentageofAverageRPB
TotalRecapture(Provision)forLossesasaPercentageofAverageRPB
() Remaining Principal Balance (RPB) of Ginnie Mae MBS this does not include M of Ginnie Mae Guaranteed Bonds
() Liability for loss on MBS program guaranty (MBS Loss Liability)
() MBS Loss Liability and investment of US Government divided by the sum of Total Assets and Remaining Principal Balance
() Total Losses from credit impairment of mortgage loans held for investment net and loss on MSR offset by the gain on sale of securities
() MBS Program income includes MBS guaranty fees interest on mortgage loans held for investment commitment fees multiclass fees and other MBS program
income
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OUR GUARANTY MATTERS 17
independen audior. Ginnie Maes operaing resuls are
subjec o change each year, depending on flucuaions in
ineres income rom is U.S. Governmen securiies and in
MBS program income, expenses and provisions or losses.
Revenues
Ginnie Mae receives no appropriaions rom general ax
revenue. Insead, is operaions are sel-financed hrough
a variey o ees. In FY 2013, Ginnie Mae generaed oal
revenue o $1,225.1 million. Tis included $870.9 million
in guarany ee income and $98.7 million in ineres income
rom U.S. Governmen securiies. I should be noed ha
Ginnie Maes cash reserves are being held a he U.S. reasury.
Figure 5 shows Ginnie Maes oal annual revenue or he las
five years.
MBS Program Income
MBS program income consiss primarily o guarany ees,
commimen ees, and ineres on morgage loans held or
invesmen (HFI). For FY 2013, MBS program income was
concenraed in guarany ees o $870.9 million, ollowed
by ineres on morgage loans HFI o $116.4 million, and
commimen ees o $92.2 million. Combined guarany
ees, morgage loans HFI and commimen ees made up
95.8 percen o oal MBS program revenue or FY 2013.
Oher lesser income sources included muliclass ees, newissuer ees, handling ees, and ranser-o-servicing ees.
Guaranty Fees
Guarany ees are income sreams earned or providing
Ginnie Maes guarany o he ull aih and credi o he
U.S. Governmen o invesors. Tese ees are paid over
he lie o he ousanding securiies. Guarany ees
are colleced on he aggregae principal balance o he
guaraneed securiies ousanding in he non-deauled
issuer porolio. MBS guarany ees grew 11.74 perceno $870.9 million in FY 2013, up rom $779.4 million
in FY 2012. Te growh in guarany ee income reflecs
he increase in he MBS porolio. Te ousanding
MBS balance a he end o FY 2013 was $1,457.1 billion,
compared wih $1,341.4 billion as o he end o FY 2012, as
new issuances exceeded repaymens (see Figure 6).
FIGURE 5: GINNIE MAE TOTAL REVENUES
FYs 2009 to 2013
FIGURE 6: REMAINING PRINCIPAL BALANCE
(RPB) OUTSTANDING IN THE MORTGAGE-BACKED
SECURITIES PORTFOLIOFYs 2009 to 2013
REVENUES
MILLIONS)
20132012201120102009
Program Income and Other Revenue
Interest Income - US Government Securities
REVENUES
($ BILLIONS)
20132012201120102009
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18 GINNIE MAE ANNUAL REPORT 2013
FIGURE 7: PLATINUM SECURITY VOLUME
FYs 2009 to 2013
FIGURE 8: TOTAL REAL ESTATE MORTGAGE
INVESTMENT CONDUIT VOLUMEFYs 2009 to 2013
PLATINUM
SECURITIES
($ BILLIONS)
20132012201120102009
REMIC
($ BILLIONS)
20132012201120102009
Commitment Fees
Commimen ees are income ha Ginnie Mae earns
or providing approved issuers wih he auhoriy o
pool morgages ino Ginnie Mae MBS. Tis auhoriy
expires 12 monhs rom is receip or single amily issuers
and 24 monhs rom is receip or muliamily issuers.
Ginnie Mae receives commimen ees as issuers reques
commimen auhoriy. Ginnie Mae issued $464.7 billion in
commimen auhoriy in FY 2013, a 14.4 percen increase
rom FY 2012. I recognizes he commimen ees as earned
when issuers use heir commimen auhoriy. Te balance is
deerred unil earned or expired, whichever occurs firs. As
o Sepember 30, 2013, commimen ees deerred oaled
$28.3 million.
Multiclass Revenue
Muliclass revenue is par o MBS program revenue and
is composed o EMIC and Plainum program ees.
Ginnie Mae issued approximaely $10.9 billion in Plainum
producs in FY 2013 (see Figure 7). oal cash ees or
Plainum securiies amouned o $3.1 million. oal cash
guarany ees rom EMIC securiies oaled $36.7 million
on $88.2 billion in issuance o EMIC producs (see
Figure 8). Ginnie Mae recognizes a porion o EMIC,
Callable rus, and Plainum program ees in he period
hey are received, wih balances deerred and amorized
over he remaining lie o he financial invesmen.
In FY 2013, Ginnie Mae issued $99.1 billion in is
muliclass securiies program (EMIC and Plainum). Te
esimaed ousanding balance o muliclass securiies in
he oal MBS securiies balance on Sepember 30, 2013,
was $468.5 billion. Tis represens a $54.0 billion decrease
rom he $522.5 billion ousanding balance as o he end
o FY 2012.
Interest Income
Ginnie Mae invess in U.S. Governmen securiies o varying
erms. In FY 2013, Ginnie Maes ineres income increased as
a percenage o oal revenue, o $98.7 million as compared
o $81.5 million in FY 2012. Tis increase resuled primarily
rom an increase in he ineres rae.
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OUR GUARANTY MATTERS 19
Expenses
Operaing expenses in FY 2013 increased by 49.3 percen o
$128.4 million, up rom $86.0 million in FY 2012, while oal
expenses were 10.48 percen o oal revenues in FY2013, up
rom 6.9 percen in FY 2012.
Ginnie Maes higher excess revenues over expenses (ne
profi) o $628.4 million or FY 2013, versus $609.6 million
or FY 2012 (see Figure 9), were driven by an increase in
guarany ees, nowihsanding an increase in expenses.
able 2 presens he expenses relaed o Ginnie Mae
programs and conracors during he las five years.
Alhough issuance volume has increased more han our
imes, relaed expenses have been managed well over his
imerame, as shown in he able.
Credi-relaed expenses include Ginnie Maes provision
or loss and deauled issuer porolio coss. Ginnie Mae
complees a MBS loss liabiliy analysis on an annual basis.
Based on his analysis in FY 2013, Ginnie Mae recognized
$422.7 million in oal provisions or losses. Tis conrass
FIGURE 9: EXCESS OF REVENUES OVER
EXPENSES FYs 2009 to 2013
EXCESS
REVENUES
($ MILLIONS)
20132012201120102009
TABLE 2: MORTGAGE-BACKED SECURITIES PROGRAM EXPENSE FYs 2009 to 2013
(In Millions)
CentralPayingAgent
ContractCompliance
FederalReserve
FinancialSupport
ITRelated&Miscellaneous
MBSInformationSystems&Compliance
Multiclass
MultifamilyProgram
ServicemembersCivilReliefAct
TOTAL
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20 GINNIE MAE ANNUAL REPORT 2013
wih $431.6 million in oal provisions or losses in FY 2012,
which drove an increase in ne profi in FY 2013. Ginnie Maedeauled one Issuer during FY 2013.
MBS Issuance and Portfolio Growth
Demand or governmen loans remained srong, and
Ginnie Mae MBS issuance increased by 18.6 percen o
$460.4 billion in FY 2013, as shown in Figure 10.
he curren ousanding MBS amoun sands a
$1,457.1 billion, which is a $115.7 billion increase over he
amoun a he end o FY 2012. Te effec o he increase ohe porolio also has changed is characer, as evidenced in
he average age o he loans. Approximaely 17.4 percen o
he $4.9 rillion in MBS guaraneed by Ginnie Mae since is
incepion has been issued in he las wo years(see Figure 11).
As shown in Figure 12, Ginnie Mae suppored approximaely
2.1 million unis o housing or individuals and amilies in
FY 2013, a 19.2 percen increase rom FY 2012.
Single Family ProgramTe vas majoriy o he morgages in Ginnie Mae securiies
are insured by FHA and VA loans. FHA-insured morgages
accouned or 61.9 percen o loans in Ginnie Mae pools,
while VA-guaraneed loans accouned or 32.9 percen in
FY 2013; ural Developmen and PIH loans made up he
remainder. Alhough oher agencies and privae issuers
may pool FHA-insured loans or heir own MBS or hold in
porolio as whole loans, almos all o hese loans make heir
way ino Ginnie Mae securiies. In FY 2013, 96.7 perceno FHA fixed loans and 98.0 percen o VA fixed-rae loans
were placed ino Ginnie Mae pools. In FY 2013, 18.9 percen
o single amily Ginnie Mae pools received a discouned
guaranee ee or he inclusion o a high percenage o loans
originaed in economically depressed markes.
Alhough loans underly ing is securi ies may be
concenraed in specific areas, Ginnie Mae has provided
homeownership opporuniies in every U.S. sae and
erriory. Figure 13 highlighs he geographic disribuion osingle amily properies securing Ginnie Mae securiies as o
Sepember 30, 2013.
Multifamily Program
A he end o FY 2013, Ginnie Mae guaraneed securiies
ha conained 99.5 percen o eligible muliamily FHA
loans. Te Muliamily Program porolio increased by
$12.4 billion, rom $67.4 billion a he end o FY 2012 o
$79.8 billion a he end o FY 2013, marking he 19h year o
consecuive growh.
Figure 14 shows he geographic disribuion o
muliamily properies securing Ginnie Mae securiies
as o Sepember 30, 2013. Since 1971, Ginnie Mae has
guaraneed $197.6 billion in muliamily MBS, helping o
finance affordable and communiy-sabilizing muliamily
housing developmens across he Naion.
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OUR GUARANTY MATTERS 21
FIGURE 10: GINNIE MAE MORTGAGE-BACKED
SECURITIES ISSUANCE FYs 2009 to 2013
FIGURE 12: GINNIE MAE-SUPPORTED UNITS
OF HOUSING FYs 2009 to 2013
0
100
200
300
400
500
2009 2010 2011 2012 2013
460.4
388.0
350.4
413.0418.9
MBS
($ BILLIONS)
UNITS OF
HOUSING
(THOUSANDS)
20132012201120102009
AMOUNT
($ BILLIONS)
2013201220112010200920052000199519901985198019751970
FIGURE 11:
CUMULATIVE AMOUNTOF GINNIE MAE
MORTGAGE-BACKED
SECURITIES ISSUED
FYs 1970 to 2013
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22 GINNIE MAE ANNUAL REPORT 2013
FIGURE 13: GEOGRAPHIC DISTRIBUTION OF SINGLE FAMILY PROPERTIES SECURING GINNIE MAE
SECURITIESas of September 30, 2013
FIGURE 14: GEOGRAPHIC DISTRIBUTION OF MULTIFAMILY PROPERTIES SECURING GINNIE MAE
SECURITIES as of September 30, 2013
STATE LOANSPERCENTOF TOTAL
LOANS
RPB
(MILLIONS)
California
Texas
Virginia
Florida
Georgia
NewYork
Maryland
NorthCarolina
Washington
Pennsylvania
Top States
STATE LOANS
PERCENT
OF TOTAL
MF LOANS
RPB
(MILLIONS)
Texas
NewYork
California
Illinois
Ohio
Florida
Maryland
Indiana
Michigan
Minnesota
Top States
LESS THAN 100,000 LOANS 100,000149,000 LOANS
150,000200,000 LOANS MORE THAN 200,000 LOANS
LESS THAN 100 LOANS 100199 LOANS 200299 LOANS
300399 LOANS MORE THAN 400 LOANS
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OUR GUARANTY MATTERS 23
In addiion, Ginnie Maes porolio o Muliamily ural
Developmen loans grew in FY 2013 o an ousanding
principal balance o $577.6 million a fiscal year-end. Teseloans are guaraneed hrough he USDAs D. Te number
o Muliamily ural Developmen programs became more
diverse in FY 2013 han in previous years, as new issuers
enered he program. Tere were ural Developmen loans
rom eigh issuers in 44 saes in Ginnie Mae pools by he
end o FY 2013.
HMBS Program
Significan effors have been made o help mee he growing
needs and demands in he marke or reverse morgages.
Wih con inued inves or in eres in HECM-backed
securiies, Ginnie Mae bolsered is HMBS program by
improving is reporing, disclosure, and qualiy assurance
reviews o he relevan issuers. Te unpaid principal
balance o HMBS climbed o $44.6 bill ion in FY 2013,
and he number o paricipaions (he unded porions
o HECM loans ha have been securiized) increased o
4,384,935. Demand in he srucured marke or HMBS
remains srong; 32 H-EMIC ransacions were issued in
FY 2013, up rom 25 in FY 2012. Te srucure and suppor
ha Ginnie Mae has brough o his marke has increased
is liquidiy, which ranslaes ino beter execuion on he
securiies and, ulimaely, lower coss or he growing
populaion o senior ciizens.
MH Program
Four Issuers are currenly approved o issue manuacured
housing securiies under Ginnie Maes MH program since
is relaunch in June 2010. Te MH programs remaining
principal balance was $284.9 million by he end o FY 2013,
up rom $276.6 million a he end o he FY 2012.
Liquidity and Capital Adequacy
Ginnie Maes primary sources o cash are MBS and muliclass
guarany ee income, and commimen ee income. Afer
accouning or expenses and oher acors, on Sepember
30, 2013, Ginnie Mae repored approximaely $9.6 billion
in unds wih he U.S. reasury, compared o $7.1 billion on
Sepember 30, 2012.
In addiion o he unds wih he U.S. reasury, Ginnie Maes
invesmen in U.S. Governmen securiies was $1.8 billion
as o Sepember 30, 2013, down rom 2.1 billion as o
Sepember 30, 2012. As he servicer, Ginnie Mae assesses
loans o deermine wheher he loan should be purchased
ou o he pool. Ginnie Mae will purchase morgage loans
ou o he pool when: morgage loans are uninsured by he
FHA, USDA, VA or PIH; morgage loans were previously
insured bu insurance is currenly denied (collecively
wih (a.), reerred o as uninsured morgage loans); and,
morgage loans ha are insured bu are delinquen or more
han 90 and 120 days based on managemen discreion or
manuacured housing and single amily loans, respecively.
In oal, Ginnie Mae bough ou 1,055 million in loans,
primarily or he single amily deauled porolio. Teseacquired morgage loans are subsequenly caegorized as
morgages held or invesmen.
able 3 shows he air value composiion and mauriy
o Ginnie Maes U.S. Governmen securiies as o
Sepember 30, 2013 and 2012.
TABLE 3: COMPOSITION OF U.S. GOVERNMENT
SECURITIES AS OF SEPTEMBER 30, 2012
AND 2013 (Percentage of Total)
MATURITY 2013 2012
Due within 1 year
Due in 1-5 years
Due in 5-10 years
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24 GINNIE MAE ANNUAL REPORT 2013
Figure 15 illusraes he componens o Ginnie Maes
Invesmens in U.S. Governmen securiies as o
Sepember 30, 2013.
Ginnie Maes MBS guarany aciviies operae a no cos
o he U.S. Governmen. Ginnie Mae acually operaes a a
profi, which reduces he U.S. Governmens budge defici.
Ginnie Maes ne income coninues o build is capial base,
and is managemen believes ha he organizaion mainains
adequae capial reserves o wihsand downurns in he
housing marke ha could cause issuer deauls o increase.
As o Sepember 30, 2013, he invesmen o he
U.S. Governmen (GAAP-based reained earnings)
was $17.0 bill ion, compared wih $16.4 bill ion as o
Sepember 30, 2012. Figure 16 shows Ginnie Maes capial
reserves as o Sepember 30, 2013, or each o he pas fiveyears .
Risk Management and Systems of Internal Controls
Ginnie Mae reviews and manages inernal conrols
ramework or he organizaion, including conracor
assessmen reviews (CAS); inernal conrols assessmens
in accordance wih OMB Circular A-123, Appendix A; and
oher inernal conrol and risk managemen aciviies. Te
audis, reviews, and monioring o all issuers and major
conracors ha Ginnie Mae conducs enable Ginnie Maeo srenghen is inernal conrols and minimize risks ha
would negaively impac financial and operaing resuls.
Finally, Ginnie Mae assesses he effeciveness o is inernal
conrols over financial reporing, including he reliabiliy o
financial reporing and financial managemen sysems, in
accordance wih he requiremens o OMB Circular A-123,
Appendix A. Saeguarding asses is a subse o all o hese
objecives. Inernal conrols should be designed o provide
reasonable assurance regarding prevenion or prompdeecion o unauhorized acquisiion, use, or disposiion o
asses. No maerial weaknesses were ound in he design or
operaion o he inernal conrols over financial reporing.
Based on hese resuls, Ginnie Mae can provide reasonable
assurance ha is inernal conrols over financial reporing
were operaing effecively.
FIGURE 16: CAPITAL RESERVES
FYs 2009 to 2013
FIGURE 15: COMPONENTS OF INVESTMENT IN
U.S. GOVERNMENT SECURITIES
as of September 30, 2013
14,036
16,37116,999
15,762
14,578
CAPITAL
RESERVES
($ MILLIONS)
0
5000
10000
15000
20000
20132012201120102009
n USGovernmentOvernightSecurities
n USGovernmentInflation-IndexedSecurties
n USGovernmentNotes
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OUR GUARANTY MATTERS 25
03A G MFY 2013 FY 2012FS
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4
CliftonLarsonAllen LLP
www.cliftonlarsonallen.com
INDEPENDENT AUDITORS REPORT
Inspector GeneralUnited States Department of Housing and Urban Development
PresidentGovernment National Mortgage Association
In our audit of the fiscal years (FY) 2013 and 2012 financial statements of the GovernmentNational Mortgage Association (Ginnie Mae), a wholly-owned government corporation within theUnited States Department of Housing and Urban Development (HUD), we found:
The financial statements are presented fairly, in all material respects, inaccordance with accounting principles generally accepted in the United States of
America (U.S.);
One significant deficiency in internal control over financial reporting; and
No instances of reportable noncompliance with certain provisions of laws andregulations tested or other matters.
The following sections and Exhibits discuss in more detail: (1) these conclusions, (2) otherinformation included with the financial statements, (3) managements responsibilities, (4) ourresponsibilities, and (5) managements response to findings.
Report on the Financial Statements
We have audited the accompanying financial statements of Ginnie Mae, which comprise thebalance sheets as of September 30, 2013 and 2012, and the related statements of revenuesand expenses and changes in investment of U.S. Government, and cash flows for the yearsthen ended, and the related notes to the financial statements. The objective of our audit was toexpress an opinion on the fairness of these financial statements.
Managements Responsibilities
Ginnie Mae management is responsible for the (1) preparation and fair presentation ofthese financial statements in accordance with accounting principles generally accepted
in the U.S., (2) preparation and presentation of other information in documentscontaining the audited financial statements and auditors report, and consistency of thatinformation with the audited financial statements; and (3) design, implementation, andmaintenance of internal control relevant to the preparation and fair presentation offinancial statements that are free from material misstatement, whether due to fraud orerror.
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Government National Mortgage Association
Financial Statements for the fiscal years ended
September 30, 2013 and 2012
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Government National Mortgage Association
Financial Statements
See the accompanying notes to the financial statements.
As of September 30 2013 2012
(Dollars in thousands)
Assets:
Funds with U.S. Treasury 9,622,400$ 7,075,500$
Guaranty asset 7,012,900 6,633,900
U.S. Government securities 1,810,200 2,113,600
Mortgage loans held for investment 6,169,600 6,866,500
Less: Allowance for mortgage loans held for investment (502,200) (177,400)
Mortgage loans held for investment, net 5,667,400 6,689,100
Foreclosed property 494,600 929,400
Less: Allowance for foreclosed property (13,500) (76,800)
Foreclosed property, net 481,100 852,600
Accrued interest on mortgage loans held for investment, net 44,900 88,600
Accrued fees and other receivables 76,100 66,300
Mortgage servicing rights 65,100 60,700
Advances agains t defaulted mortgage-backed security pools 261,600 156,900
Less: Allowance for uncollectible advances (162,500) (97,200)
Advances agains t defaulted mortgage-backed security pools , net 99,100 59,700
Fixed assets--software 94,600 87,500
Less: Accumulated amortization (58,100) (47,400)
Fixed assets--software, net 36,500 40,100
Short sale claims receivables 81,600 36,800Les s: Allowance for uncollectible s hort sale claims receivables (19,900) (15,700)
Short sale claims receivables, net 61,700 21,100
Properties held for sale 29,600 15,500
Less: Allowance for losses on properties held for sale (6,200) (3,900)
Properties held for sale, net 23,400 11,600
Accrued interest on U.S. Government securities 10,400 10,300
Insurance claims receivable 8,400 6,500
Total Assets 25,019,600$ 23,729,600$
Liabilities and Investment of U.S. Government:
Liabilities:
Guaranty liability 7,012,900 6,633,900
Liability for loss on mortgage-backed securities program guaranty 700,300 357,400
Accounts payable and accrued liabil ities 167,200 235,200
Deferred revenue 139,200 134,400
Deferred liabilities and deposits 300 (2,700)
Total Liabilities 8,019,900$ 7,358,200$
Commitments and Contingencies
Investment of U.S. Government 16,999,700 16,371,400
Total Liabilities and Investment of U.S. Government 25,019,600$ 23,729,600$
Balance Sheets
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Government National Mortgage Association
Financial Statements
See the accompanying notes to the financial statements.
For the Years Ended September 30 2013 2012
(Dollars i n thousands)
Revenues:
Mortgage-backed securities guaranty fees 870,900$ 779,400$
Interest income - mortgage loans held for investment 116,400 279,800
Interest income - US Government securities 98,700 81,500
Commitment fees 92,200 79,100
Multiclass fees 39,900 25,000
Other mortgage-backed securities program income 7,000 1,800
Total Revenues 1,225,100 1,246,600$
Expenses:
Mortgage-backed securities program expenses (100,200) (62,900)
Adminis trative expenses (17,500) (14,100)
Fixed asset amortization (10,700) (9,000)
Total Expenses (128,400) (86,000)$
Recapture (Provision) for loss on properties held for sale (17,200) (9,200)
Recapture (Provision) for loss mortgage loans held for investment (16,100) (158,100)
Recapture (Provision) for loss on mortgage-backed securities liability (402,100) (264,500)
Recapture (Provision) for loss on short sale claims and other receivables (9,700) (16,900)
Recapture (Provision) for loss on foreclosed property (13,500) -
Recapture (Provision) for loss on uncollectible advances 35,900 17,100
Total Recapture (Provision) (422,700) (431,600)$
Gain (Loss) on disposition of investment - 12,500
Gain (Loss) on credit impairment of mortgage loans HFI, net (50,000) (81,700)
Gain (Loss) on mortgage servicing rights 4,400 (50,200)
Total Other Gains / (Losses) (45,600) (119,400)$
Excess of Revenues over Expenses 628,400 609,600
Investment of U.S. Government at Beginning of Year 16,371,300 15,761,800
Investment of U.S. Government at End of Year 16,999,700$ 16,371,400$
Statements of Revenues and Expenses and Changes in Investment of U.S. Government
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Government National Mortgage Association
Financial Statements
See the accompanying notes to the financial statements.
For the Years Ended September 30 2013 2012
(Dollars in thousands)
Cash Flow from Operating Activities
Net Excess of Revenues over Expenses $ 628,400 $ 609,600
Adjustments to reconcile Net Excess of Revenues Over Expenses to Net Cash from
Operating Activities:
Amortization 10,700 9,000
Change in accrued interest on U.S. Government securities (100) 1,500
Change in accrued interes t on m ortgage loans held for inves tm ent, net 43,700 (5,200)
Change in advances against defaul ted mortgage-backed securi ties pools, net (39,400) 593,500
Change in foreclosed property, net 371,500 (852,600)
Change in insurance claims receivables (1,900) (6,500)
Change in mortgage servicing rights (4,400) 50,200
Change in deferred revenue 4,800 17,000
Change in deferred liabilities and deposits 3,000 (38,400)
Change in accrued fees and other receivables (9,800) (3,800)
Change in short sale claims receivables, net (40,600) 11,200
Change in properties held for sale, net (11,800) (8,200)
Change in accounts payable and accrued liabilities (68,000) (130,100)
Change in l iabi li ty for loss on mortgage-backed securi ties program guaranty 342,900 (38,400)
Net Cash from Operating Activities $ 1,229,000 $ 208,800
Cash Flow from Investing Activities
Change in m ortgage loans held for investment, net 1,021,700 (338,800)
Sale of U.S. Government securities, net 303,400 13,200
Purchase of software (7,200) (18,000)
Net Cash (used for) from Investing Activities 1,317,900$ (343,600)$
Cash Flow from Financing Activities
Financing activities - -
Net Cash from Financing Activities -$ -$
Net increase (decrease) in cash & cash equivalents 2,546,900 (134,800)
Cash & cash equivalents - beginning of period 7,075,500 7,210,300
Cash & cash equivalents - end of period $ 9,622,400 $ 7,075,500
For the Years Ended September 30 2013 2012(Dollars in thousands)
Transfer of Advances against Defaulted MBS pools to
Mortgage Loans Held for Investment 1,055,400$ 705,007$
Transfer from Mortgage Loans Held for Investment to 42,600$ 25,500$ropert es e or a e
Statements of Cash Flows
Supplemental Schedule of Non-Cash Activities
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Notes to the Financial Statements
September 30, 2013 and 2012
Note 1: Organization and Summary of Significant Accounting Policies
The Government National Mortgage Association (Ginnie Mae) was created in 1968, through anamendment of Title III of the National Housing Act as a government corporation within theUnited States (U.S.) Department of Housing and Urban Development (HUD). The Mortgage-
Backed Securities (MBS) program is Ginnie Maes primary ongoing activity. Its purpose is toincrease liquidity in the secondary mortgage market and attract new sources of capital for
residential mortgage loans. Through the program, Ginnie Mae guarantees the timely payment ofprincipal and interest on securities backed by pools of mortgages issued by private institutions.
This guaranty is backed by the full faith and credit of the U.S. Government. Ginnie Mae requiresthat the mortgages be insured or guaranteed by the U.S. Federal Housing Administration (FHA),
another government Corporation within HUD, the U.S. Department of Agriculture (USDA), theDepartment of Veterans Affairs (VA), or the HUD Office of Public and Indian Housing (PIH).
These MBS are not assets of Ginnie Mae, nor are the related outstanding securities liabilities;accordingly, neither is reflected on the accompanying Balance Sheets.
To ensure that adequate capital continues to flow to the mortgage markets, Ginnie Mae offers
reliable solutions that meet the needs of a broad constituent base and provide sufficient flexibilityto respond to market changes. At the core of its business model and its product offering menu is
the simple pass-through security, which comes in the form of two product structuresGinnieMae I MBS and Ginnie Mae II MBS. Each Ginnie Mae product structure has specific
characteristics regarding pool types, note rates, collateral, payment dates, and geographicallocations.
The underlying source of loans for the Ginnie Mae I MBS and Ginnie Mae II MBS comes fromGinnie Maes following four main programs, whichserve a variety of loan financing needs anddifferent issuer origination capabilities:
Single Family Program The majority of Ginnie Mae securities are backed by single
family mortgages predominantly originated through FHA and VA loan insuranceprograms.
Multifamily Program Ginnie Mae insures securities backed by FHA and USDApurchase and refinance loans for the purchase, construction, and renovation of apartmentbuildings, hospitals, nursing homes, and assisted living facilities.
HMBS Program Ginnie Maes Home Equity Conversion Mortgage (HECM) securities
program provides capital and liquidity for FHA-insured reverse mortgages. HECM loansare insured separately from regular single family mortgages due to their unique cash flowand fee structure. HECM loans can be pooled into HECM Mortgage Backed Securities
(HMBS) within the Ginnie Mae II MBS program.
Manufactured Housing Program Ginnie Maes Manufactured Housing programallows the issuance of pools of loans insured by FHAs Title I Manufactured Home Loan
Program.
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Basis of Presentation: The accompanying financial statements have been prepared inaccordance with accounting principles generally accepted in U.S. GAAP as established by the
Financial Accounting Standards Board (FASB).
Funds with U.S. Treasury: All Ginnie Mae receipts and disbursements are processed by theU.S. Treasury Department, which in effect maintains Ginnie Maes bank accounts. All funds are
accessible in the event of a default. For purposes of the Statements of Cash Flow, Funds withU.S. Treasury are considered cash.
U.S. Government Securities: U.S. Government Securities are classified as held for investment
as Ginnie Mae has both the ability and the intent to hold them until their maturity, andaccordingly, they are carried at amortized cost. Interest income on such securities is presented on
the Statements of Revenues and Expenses and Changes in Investment of U.S. Government(Statements of Revenues and Expenses). Discounts and premiums are amortized, on a level yield
basis, over the life of the related security.
Financial Guarantees: Ginnie Mae, as guarantor, follows the guidance in FASB Accounting
Standards Codification (ASC) Topic 460, Guarantees (ASC 460), for its accounting for, anddisclosure of, the issuance of certain types of guarantees. ASC 460 requires that upon issuance
of a guaranty, the guarantor must recognize a liability for the fair value of the obligation itassumes under the guaranty. The issuance of a guaranty under the MBS program obligates
Ginnie Mae to stand ready to perform over the term of the guaranty in the event that the specifiedtriggering events or conditions occur. This means Ginnie Mae will advance funds to investors
and service an issuers portfolio in the event of their default.
At inception of the guaranty, Ginnie Mae recognizes a liability for the guaranty it provides onMBSs issued by third-party issuers. Generally, a guaranty liability is initially measured at fair
value. However, Ginnie Mae applies the practical expedient in ASC 460, which allows the
guaranty liability to be recognized at inception based on the premium received or receivable bythe guarantor, provided the guaranty is issued in a standalone arms length transaction with anunrelated party.
Ginnie Mae provides the guaranty of principal and interest payments to MBS holders in the
event of issuer default and, in exchange, receives monthly guaranty fees from the issuers on theunpaid principal balance of the outstanding MBSs in the non-defaulted issuer portfolio.
Accordingly, the guaranty asset is based on the expected present value of these fees, taking intoaccount anticipated amortization of defaults and prepayments.
Additionally, as the guaranty is issued in a standalone transaction for a premium, Ginnie Mae
records a guaranty liability to recognize the future expense for its guaranty as the offsetting entryfor the guaranty asset. Thus, there is no impact from the guaranty liability and asset on the netfinancial position of Ginnie Mae.
Mortgage Servicing Rights:Mortgage Servicing Rights (MSR) represent Ginnie Maes right
and obligation to service mortgage loans in mortgage backed securities obtained from defaultedissuers. Ginnie Mae contracts with multiple Master Subservicers (MSS) to provide the servicing
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of its mortgage loans. The servicing functions typically performed by Ginnie Maes MSSsinclude: collecting and remitting loan payments, responding to borrower inquiries, accounting
for principal and interest, holding custodial funds for payment of property taxes and insurancepremiums, counseling delinquent mortgagors, supervising foreclosures and property dispositions,
and generally administering the loans. Ginnie Mae receives a weighted average servicing feeannually on the remaining outstanding principal balances of the loans. These servicing fees are
included in and collected from the monthly payments made by the borrowers. Ginnie Mae pays aservicing expense to the MSSs in consideration for servicing the loans.
Ginnie Mae records a servicing asset or liability each time it takes over a defaulted issuers
Ginnie Mae-guaranteed portfolio. The balance of the MSR represents the present value of theestimated compensation for mortgage servicing activities that exceeds the fair market cost for
such servicing activities. Ginnie Mae considers its fair market cost to be the amount ofcompensation that would be required by a substitute MSS should one be required. Typically, the
benefits of servicing are expected to be more than adequate compensation to a servicer forperforming the servicing, and the contract results in a servicing asset. However, if the benefits of
servicing are not expected to adequately compensate a servicer for performing the servicing, the
contract results in a servicing liability.
Ginnie Mae has elected the fair value option for the MSRs to better reflect the potential net
realizable or market value that could be ultimately realized from the disposition of the MSR assetor the settlement of a future MSR liability. Ginnie Mae uses a valuation model that calculates
the present value of estimated future net servicing income to determine the fair value of MSRs,which factors in key economic assumptions and inputs used in valuations of MSRs include
prepayment rates, cost to service a loan, contractual servicing fee income, ancillary income,escrow account earnings, and the discount rate. The discount rate is used to estimate the present
value of the projected cash flows in order to estimate the fair value of the MSRs. The discountrate assumptions reflect the markets required rate of return adjusted for the relative risk of the
asset type. This approach consists of projecting servicing cash flows and estimating the presentvalue of these cash flows using discount rates. Upon acquisition, Ginnie Mae measures its
MSRs at fair value and subsequently re-measures the assets or liabilities with changes in the fairvalue recorded in the Statements of Revenues and Expenses.
Advances Against Defaulted MBS Pools: Advances against defaulted MBS pools representpass-through payments made to fulfill Ginnie Maes guaranty of timely principal and interest
payments to MBS security holders. The advances are reported net of an allowance to the extentthat management believes that they will not be recovered. The allowance for uncollectible
advances is estimated based on actual and expected recovery experience including expectedrecoveries from FHA, USDA, VA and PIH. Other factors considered in the estimate include
market analysis and appraised value of the loans. These loans are still accruing interest becausethey have not reached the required delinquency thresholds and purchased from the defaulted
issuer pools.
Once Ginnie Mae purchases the loans from the pools after the 90 and 120 day delinquencythresholds for Manufactured Housing and Single Family loans, respectively, the loans are
reclassified as Mortgage Loans Held for Investment (HFI) below. Ginnie Mae records a charge-
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off as a reduction to the allowance for loan losses when losses are confirmed through the receiptof assets in full satisfaction of a loan, such as the receipt of claims proceeds from an insuring
agency or underlying collateral upon foreclosure.
Mortgage Loans HFI: When a Ginnie Mae issuer defaults, Ginnie Mae is required to step intothe role of the issuer and make the timely pass-through payments to investors, and subsequently,
assumes the servicing rights and obligations of the issuers entire Ginnie Mae guaranteed, pooledloan portfolio of the defaulted issuer. Ginnie Mae utilizes the MSSs to service these portfolios.
There are currently two MSSs for Single Family and one MSS for Manufactured Housingdefaulted issuers. These MSSs currently service 100% of all non-pooled loans.
In its role as servicer, Ginnie Mae assesses individual loans within its pooled portfolio to
determine whether the loan must be purchased out of the pool as required by the Ginnie MaeMBS Guide. Ginnie Mae purchases mortgage loans out of the MBS pool when:
A. Mortgage loans are uninsured by the FHA, USDA, VA or PIHB. Mortgage loans were previously insured but insurance is currently denied (collectively
with B), referred to as uninsured mortgage loans)C. Mortgage loans are insured but are delinquent for more than 90 and 120 days based on
management discretion for manufactured housing and single family loans, respectively.
During FY 2013, the majority of purchased mortgage loans were bought out due to borrowerdelinquency of more than 90 or 120 days depending on loan type (i.e., Single Family or
Manufactured Housing).
Ginnie Mae evaluates the collectability of all purchased loans and assesses whether there isevidence of credit deterioration subsequent to the loans origination and it is probable, at
acquisition, that Ginnie Mae will be unable to collect all contractually required payments
receivable. Ginnie Mae considers guarantees and insurance from FHA, USDA, VA and PIH indetermining whether it is probable that Ginnie Mae will collect all amounts due according to thecontractual terms.
For FHA insured loans, Ginnie Mae expects to collect the full amount of the unpaid principalbalance and debenture rate interest (only for months allowed in the insuring agencys timeline),
when the insurer reimburses Ginnie Mae subsequent to filing a claim. As a result, these loansare accounted for under ASC Subtopic 310-20, Receivables Nonrefundable Fees and Other
Costs. In accordance with ASC 310-20-30-5, these loans are recorded at the unpaid principalbalance which is the amount Ginnie Mae pays to repurchase these loans. Accordingly, Ginnie
Mae recognizes interest income on these loans on an accrual basis at the debenture rate for the
number of months allowed under the insuring agencys timeline. After the allowed timeline,Ginnie Mae considers these loans to be non-performing as the collection of interest is no longerreasonably assured, and places these loans on nonaccrual status. Ginnie Mae recognizes interest
income for loans on nonaccrual status when cash is received.
Ginnie Mae separately assesses the collectability of mortgage loans bought out of the defaultedportfolios that are uninsured and loans that are non-FHA insured for which Ginnie Mae only
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receives a portion of the outstanding principal balance. If the principal and interest payments arenot fully guaranteed from the insurer (i.e., there is a lack of insurance), or loans are delinquent at
acquisition, it is probable that Ginnie Mae will be unable to collect all contractually requiredpayments receivable. Accordingly, these loans are considered to be credit impaired and are
accounted for under ASC Subtopic 310-30, Receivables Loans and Debt Securities Acquiredwith Deteriorated Credit Quality. At the time of acquisition, these loans are recorded at the
lower of their acquisition cost or present value of expected amounts to be received. As non-performing loans, these loans are placed on nonaccrual status.
Ginnie Mae has the ability and the intent to hold these acquired loans for the foreseeable future
or until maturity. Therefore, Ginnie Mae classifies the mortgage loans as held for investment(HFI). The mortgage loans HFI are reported net of allowance for loan losses. Mortgage loans
HFI also includes mortgage loans that are undergoing the foreclosure process.
Ginnie Mae performs periodic and systematic reviews of its loan portfolios to identify creditrisks and assess the overall collectability of the portfolios for the estimated uncollectible portion
of the principal balance of the loan. The allowance for loss on mortgage loans HFI represents
managements estimate of probable credit losses inherent in Ginnie Maes mortgage loanportfolio. The allowance for loss on mortgage loans HFI is netted against the balance ofmortgage loans HFI. Additionally, Ginnie Mae incorporates the probable recovery amount from
mortgage insurance (e.g., FHA, USDA, VA, or PIH) based on established insurance rates. Tomake this evaluation, Ginnie Mae reviews the delinquency of mortgage loans, industry
benchmarks, as well as the established rates of insurance recoveries from insurers.
Ginnie Mae records a charge-off as a reduction to the allowance for loan losses when losses are
confirmed through the receipt of assets in full satisfaction of a loan, such as the receipt of claimsproceeds from an insuring agency or underlying collateral upon foreclosure.
Insurance Claims Receivable: Ginnie Mae records a receivable for insurance claims whichhave been submitted to an insuring agency for claim, but have not been paid as of the end of thereporting period. Because it is a Federal Receivable, Ginnie Mae expects full reimbursement.
As a result, no allowance is calculated on this receivable.
Properties Held for Sale: Properties held for sale represent assets that Ginnie Mae has receivedthe title of the underlying collateral (e.g. completely foreclosed upon and repossessed) and
intends to sell the collateral. For instances in which Ginnie Mae does not convey the property tothe insuring agency, Ginnie Mae holds the title until the property is sold. As the properties are
available for immediate sale in their current condition and are actively marketed for sale, they arereported as properties held for sale on the Balance Sheets in accordance with ASC Subtopic 360-
10,Property, Plant, and Equipment Overall. Properties held for sale are initially recorded onthe Balance Sheets at fair value less its estimated cost to sell. The fair value less estimated costto sell on the date of foreclosure is deemed to be the carrying value of the foreclosed asset.
Subsequent to initial measurement, the properties held for sale are reported at the lower of thecarrying amount or fair value less estimated cost to sell. The properties are appraised by
independent entities on a regular basis throughout the year. Ginnie Mae expects sale of theproperty to occur prior to one year from the date of the foreclosure. As a result, Ginnie Mae
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does not depreciate these assets. Ginnie Mae records an allowance to account for potential salecosts including maintenance and miscellaneous expenses, along with a loss percentage based on
historical data, which includes declines in the fair value of foreclosed properties.
Short Sale Claims Receivable: As an alternative to foreclosure, a property may be sold for itsappraised value even if the sale results in a short sale where the proceeds are not sufficient to pay
off the mortgage. Ginnie Maes MSSs analyze mortgage loans HFI for factors such asdelinquency, appraised value of the loan, and market in locale of the loan to identify loans that
may be short sale eligible. These transactions are analyzed and approved by Ginnie Maes MBSprogram office.
For FHA insured loans, for which the underlying property was sold in a short sale, the FHA
typically pays Ginnie Mae the difference between the proceeds received from the sale and thetotal contractual amount of the mortgage loan and interest at the debenture rate. Hence, Ginnie
Mae does not incur any losses as a result of the short sale of an FHA insured loan. Ginnie Maerecords a short sale claims receivable while it awaits repayment of this amount from the insurer.
For short sale claims receivable for which Ginnie Mae believes that collection is not probable,
Ginnie Mae records an allowance for short sale claims receivable. The allowance for short salesclaims receivable is estimated based on actual and expected recovery experience includingexpected recoveries from FHA, USDA, VA, and PIH. The aggregate of the short sale claims
receivable and the allowance for short sale claims receivable is the amount that Ginnie Maedetermines to be collectible. Ginnie Mae records a charge-off as a reduction to the allowance for
loan losses when losses are confirmed through the receipt of claims in full satisfaction of a loanfrom an insuring agency.
Foreclosed Property: Ginnie Mae records foreclosed property when a MSS receivesmarketable title to a property which has completed the foreclosure process in the respective state.
The asset is measured as the principal and interest of a loan which is in the process of being
conveyed to an insuring agency, net of an allowance. These assets are conveyed to theappropriate insuring agency within six months. Foreclosed property has previously been placedon nonaccrual status after the loan was repurchased from a pool. These properties differ from
properties held for sale because they will be conveyed to an insuring agency, and not sold by theMSS.
The allowance for foreclosed property is estimated based on actual and expected recovery
experience including expected recoveries from FHA, USDA, VA, and PIH. The aggregate of theforeclosed property and the allowance for foreclosed property is the amount that Ginnie Mae
determines to be collectible. Ginnie Mae records a charge-off as a reduction to the allowance forloan losses when losses are confirmed through the receipt of assets in full satisfaction of a loan,
such as the receipt of claims proceeds from an insuring agency.
Liability for Loss on MBS Program Guaranty: Liability for loss on MBS program guaranty
(MBS loss liability) represents managements estimate of future losses to be incurred as a resultof the guaranty provided on MBS portfolios when information indicates a loss is probable and
the amount of loss can be reasonably estimated.
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The MBS loss liability is established to the extent management believes losses due to issuerdefaults are probable and estimable and servicing income and FHA, USDA, VA, and PIH
insurance proceeds do not fully cover Ginnie Mae servicing and loan acquisition related costs.Ginnie Mae establishes a MBS loss liability through a provision charged to operations when, in
managements judgment, losses associated with existing defaulted issuers or performing issuerdefaults are probable and estimable. In estimating losses, management utilizes a statistically-
based model that evaluates numerous factors, including, but not limited to, general and regionaleconomic conditions, mortgage characteristics, and actual and expected future default and loan
loss experience. Ginnie Mae also analyzes the ability of the borrowers to pay as well as therecovery amount from mortgage insurance when estimating valuations of the mortgage-related
assets and liabilities.
Additionally, the Office of Enterprise Risk (ERO) utilizes CorporateWatch to assist in theanalysis of potential defaults. Corpora