Orion’s brokers who know their history know that the Government National Mortgage Association (aka Ginnie Mae) was created in 1938 to support the financing tougher credit risks such as the first-time homebuyer, the cash-strapped buyer, manufactured homes, and lower income credit buyers. These homebuyers usually have risk factors that will translate into bigger loan level pricing adjustments and will often require a higher note rate to make the math work. If higher note rates are not available, then it becomes tough to finance this level of borrower, compromising Ginnie Mae's mission.

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Our brokers also know that Ginnie Mae is not “small potatoes”: it’s mortgage-backed securities (MBS) portfolio outstanding grew to $2.60 trillion in June of 2024, including $36.7 billion of total MBS issuance, leading to $16.0 billion of net growth. June’s new MBS issuance supports the financing of more than 113,000 households, including more than 57,000 first-time homebuyers. Approximately 74 percent of the June MBS issuance reflects new mortgages that support home purchases because refinance activity remained low due to higher interest rates.

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Much of Ginnie Mae’s focus is on FHA and VA loans, both of which Orion does. In fact, some of our broker’s best clients are FHA and VA borrowers. Due to concerns about VA loan churning (the practice of convincing existing borrowers to refinance, even when it may not make sense) Ginnie Mae makes adjustments all of the time to its guidelines and lender requirements.

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There are no “smoke and mirrors” when it comes to these straightforward products, so tell clients not to be led into believing that a lender has a special program. Handbook 4000.1 is a comprehensive source of FHA Single Family Housing policy for mortgagees and other stakeholders. It covers definition, standard, and documentation for FHA products and programs, and provides online and PDF access, supplemental documents, and training webinars. For VA there is the Lenders Handbook with reference material. It provides the official guidance for lenders who participate in the VA loan program. It covers topics such as lender approval, veteran eligibility, credit underwriting, appraisal, and sanctions.

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FHA and VA loans are typically placed into securities. Ginnie Mae provides a full-faith-and credit guarantee on these securities, thus lessening the risk for investors and broadening the market for the securities.

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Ginnie Mae has two concerns. The first is the fees incurred by borrowers for repeated refinances. Second, the early repayment of the VA loans, thus curbing the financial benefit to investors in MBS pools. It can take years for the borrowers to break even on the fees paid. Early repayment of the loans impacts the ability of investors to make their desired returns. The demand for certain coupon levels is reduced which in turn, affects loan pricing for borrowers.

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We remind our brokers that Orion is in fine standing with the FHA and VA programs. We will keep it that way. Orion firmly believes in supporting FHA and VA borrowers and helping you help them save money.

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