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Nonbank Lenders Now Largest Mortgage Issuers
Tuesday, May 26, 2015 6:35 AM

As major banks have pulled back from originating Federal Housing Administration single-family loans, nonbank mortgage lenders have become bigger players in the Ginnie Mae program.

In 2011, the three largest banks, Wells Fargo, JPMorgan Chase, and Bank of America, accounted for 68 percent of Ginnie Mae's mortgage-backed securities business. Today, nonbank mortgage lenders are responsible for 64 percent of Ginnie MBS issuance.

Banks have reduced their Ginnie issuance in part due to pressure from the Justice Department and the Department of Housing and Urban Development to enter into major settlements for allegedly sloppy underwriting of FHA-insured loans.

Although nonbank mortgage lenders pose more risks for the secondary market agency, PennyMac and Quicken Loans have become top Ginnie issuers.

In April, lenders securitized $38.9 billion in single-family loans via Ginnie Mae. FHA loans totaling $23.5 billion comprised 62 percent of Ginnie Mae issuance in April, compared to $13 billion in VA loans, which comprised 35 percent of Ginnie issuance in April. [Ginnie also securitizes Rural Housing Service loans, which make up about 3 percent to 5 percent of Ginnie securities.]

The largest MBS issuer is still Wells Fargo, with a 16 percent share of Ginnie Mae issuance. Freedom Mortgage has a 7 percent share, while JPMorgan, PennyMac and Quicken Loans each have a 6 percent share and U.S. Bank has a 4 percent share. The top five issuers were responsible for 39 percent of all Ginnie Mae MBS issuance during the first seven months of fiscal year 2015.

While banks sometimes deal with liquidity issues, nonbank lenders, which depend on lines of credit and other sources of funding, pose more counterparty risk for Ginnie.

Ginnie has been seeking more funds from Congress to beef up its monitoring staff. The administration requested $28 million for Ginnie staffing in fiscal year 2016, up from $23 million this year. Ginnie has $25 billion in capital to cover any losses.

Source: National Mortgage News, 18 May 2015