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72 I N D U S T R Y I N S I G H T / T E D T O Z E R GINNIE MAE: TRANSFORMING THE EVOLVING MARKETPLACE In the face of a changing industry, Ginnie Mae continues to lead the discussion on the state of housing finance. Today's housing market barely resembles the market that existed five or even four years ago, much less the environment that was in place when Ginnie Mae was created in 1968 or when it issued the world's first mortgage-backed security (MBS) in 1970. e depth and impact of the financial crisis, rooted in residential financing, have changed the entire landscape for mortgage lending. e transformation is having a profound impact on the entire housing finance system. What it will look like when the dust settles is still far from clear with one of the most notable questions being how housing finance will be restructured. But one thing is crystal clear: Banks, the traditional cornerstone of our market, are retreating from the mortgage business. Having weighed the reputational risks, many depository institutions have concluded that less exposure is the more prudent course. e void is being filled by non-depositories often financed by private equity, presenting new opportunities and new challenges. e retreat is occurring at a time when private capital is plentiful, allowing new entrants to flourish, which is a good thing for overall credit access. e terms under which the non- traditional private capital reaches the market, however, are riskier and more complex, as reflected by the structures of these new entities. Despite these changes, Ginnie Mae has remained steadfast and strong. Our unique public-private partnership is opening the doors to homeownership for veterans, rural Americans, and low- and moderate-income families. Without Ginnie Mae's guaranty, which allows for attractive lending interest rates for borrowers, that door would have slammed shut on many families. Indeed, Ginnie Mae and the Federal Housing Administration (FHA) together formed the catalyst for the recovery of the housing market–FHA with appropriate mortgage credit standards and Ginnie Mae with an abundant supply of low-cost funding. GINNIE MAE: THE FULL FAITH AND CREDIT OF THE U.S. GOVERNMENT When the housing crisis hit the American mortgage finance system, crippling the GSEs and causing private label securities to pull back, Ginnie Mae's guaranteed MBS emerged as the preferred securitization model for lenders to fund the origination of mortgages used to purchase homes once again proving its countercyclical value of providing liquidity. Ginnie Mae's guaranteed MBS also became a highly sought-after asset in the international and domestic capital markets. Since then, Ginnie Mae's volume of outstanding MBS guaranties and its issuer base have expanded significantly. In May 2014, it reached $1.5 trillion in guaranties outstanding, with an estimated 40 percent of guaranteed MBS owned by foreign investors. It took Ginnie

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