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60 homebuyer, but in so doing also adds intricacies and niche specialization demands for the GSE to account for as it monitors its program participants. During the introductory Summit panel, Ginnie Mae president Ted Tozer told the audience: "e retreat of traditional depository banks from mortgage lending and servicing is transforming the housing industry. In fact, 60 percent of our top 10 issuers are non-depository institutions; this presents a variety of complex challenges for the industry." In addressing this specific topic, and coincident with the Issuer Summit, Ginnie Mae posted a white paper to its website. e 19-page document provides Ginnie Mae's perspective on the major challenges it faces as a result of the evolving mortgage industry. In particular, the GSE is concerned about the implications of what it refers to as "the replacement of this capacity by non-depository institutions with more complex financial and operational structures … than that for which the program was designed." e data shows that nonbanks are now issuing 44 percent of Ginnie Mae securities compared to 13 percent in 2011. STRATEGIC VIEWS is era of transformation for Ginnie Mae is contemplated thoroughly and enumerated through strategic views that it believes are critical to the debate of how its MBS program and platform must change with the industry evolution. e strategic views are noteworthy for two reasons. First, absent housing finance reform and continued debate in 2014, Ginnie Mae is now leading a portion of the public policy discussion on major issues presented by the transformation of mortgage lending. Second, yet equally important, Ginnie Mae is documenting its positions in the public domain through assertive leadership that commands attention in a manner it has not previously pursued. Policymakers should be concerned with the "retreat of banks holistically." Ginnie Mae will advocate for an environment preserving servicing and servicing rights as an economically viable "attractive asset class." Further, the rising prominence of nonbanks is a "natural market response" to market factors. Ginnie Mae "is supportive of a responsible evolution" in the market-place and "is willing to explore making appropriate modifications to its MBS program." Also of note is the assertion that Ginnie Mae "will upgrade its ability to assess financial and operating activity of its issuers." ey have identified three specific areas for particular focus: closer scrutiny of an issuer's liquidity and sources of funding, more frequent and detailed mortgage servicing rights portfolio valuations, and greater attention to operational capability and delivery of data-driven operational performance information. In directing its efforts on market liquidity, Ginnie Mae is focused on enhancing standards for issuer liquidity and increased attention to MSR valuations, recognition of MSRs as collateral (via Acknowledgement Agreements), continued exploration of how advance financing can be provided with respect to government servicing, development of loan level servicing alternatives to avoid the need to service or transfer the entire pool, and attention to the development of MSRs as an alternative asset class. In the event of a "spiraling series of compliance failures," issuers who are not complying with "essential program terms … will be deemed unacceptable risk and will be removed" from the program. In such circumstances, Ginnie Mae will outsource responsibility to other issuers to perform issuer duties rather than manage the MSR assets itself. RELEVANCE OF GINNIE MAE PERSPECTIVE VIS-À-VIS INCREASED MARKET SHARE In delivering the key markers for how it views today's environment, Ginnie Mae acknowledges its compact size and its unique position as guarantor only. e former point is identified in a chart delineating its number of employees. At 108 full-time-equivalent staff in 2013, Ginnie Mae pales in comparison to the staffing levels of Fannie Mae and Freddie Mac. at is primarily because Ginnie Mae's business model has it in a guarantor-only and fourth-loss position. Ahead of Ginnie Mae in absorbing losses is homeowner equity; government insurance provided by the Federal Housing Administration, the Veterans Administration, the Rural Development program of the United States Department of Agriculture, and the Public and Indian Housing program of the United States Department of Housing and Urban Development; and issuer resources. Only after those resources are exhausted does the Ginnie Mae guarantee come into play. But with a changing issuer base and growing volume, Ginnie Mae will need to augment its staffing base while continuing to leverage private contractors who offer the agency private sector skills. Recent MBS volume shared at the Summit tells the story of a burgeoning program. In reviewing MBS new issue volume in August, Ginnie Mae accounted for $31.6 billion, while Fannie Mae did $35.5 billion. Ginnie Mae's market share of new issuance volume is 32 percent in 2014 year-to-date versus 26 percent in 2013. Equally relevant to today's housing market is the nearly equal volume of purchase mortgage composition of Ginnie Mae and Fannie Mae issuance. And true to its mission, the percentage of first-time homebuyers in the Ginnie Mae MBS has remained above 60 percent throughout this fiscal year. AN UNBLEMISHED RECORD OF PROFITABLE OPERATION In closing out the 2014 Summit, Ginnie Mae's Tozer said: "Ginnie Mae's primary goal has been, and will always be, to protect and preserve the utility, relevance, and remarkably successful track record of the Ginnie Mae MBS program. e agency's pioneering role in the creation of a securities market for mortgage loans, its continued ability to refine the program as necessary to maintain its unblemished record of profitable operation over decades of market change and disruption is a testament to the power of a well-conceived and executed government effort to support the healthy functioning of a sizable and critical private sector function." As the mortgage industry evolves through this era of transformation, the attraction to Ginnie Mae's steadfast MBS program is increasing, and the GSE will be aggressive about enhancing its programs and infrastructure. As such, it is incumbent on all Ginnie Mae program participants to fully engage on the developments in housing finance reform overall and Ginnie Mae in particular. Ginnie's Tozer has opined in a thoughtful and deliberative manner on how his agency views the landscape through five strategic views. Tozer is to be applauded for the transparency. It is important to take stock and be mindful of how the Ginnie Mae guidance may impact your business.

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