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10 GINNIE MAE'S BRIGHT FUTURE On November 29, 2017, the House Financial Services Committee held a hearing entitled, "Sustainable Housing Finance: e Role of Ginnie Mae in the Housing Finance System." Michael R. Bright, Acting President, Government National Mortgage Association (Ginnie Mae), appeared before the committee to discuss the challenges currently facing Ginnie Mae, as well as what challenges and adaptations await it in the future. Much of the discussion focused on a paper Bright cowrote with former FHFA Acting Director Ed DeMarco in September 2016. Bright's and DeMarco's proposal would "end the conservatorships, reconstitute Fannie Mae and Freddie Mac as lender-owned mutuals, and build on the credit risk transfer (CRT) initiative to create a private market for mortgage credit risk while preserving a government-guaranteed rates market for mortgage-backed securities." In addition, Ginnie Mae would be removed from the Department of Housing and Urban Development (HUD) and converted into a standalone government corporation like the FDIC, "with authority over its own budget, hiring, and compensation." Obviously, making dramatic changes to Ginnie could be a cause for concern to some. As Rep. Brad Sherman (D-California) put it, "I don't buy the idea that 'if it's not broke, don't fix it,' because sometimes you can make things better. But if it's not broke, don't break it." Even though he proposes changes, Bright had plenty of positive things to say about Ginnie and the things it does well. "At a very high level, the Ginnie Mae wrap works because we do two things effectively. First, we are transparent about our rules and our processes with our investors. And second, we work hard to police our program." Whether or not Ginnie undergoes that sort of large-scale change in the future, there are plenty of challenges closer at hand. With the mortgage market moving to modernize and embrace eMortgages, Ginnie Mae is moving to follow. While Bright conceded there were various upgrade and architecture challenges posed by this, he said Ginnie has those upgrades slated for 2018. Rep. Dennis Ross (R-Florida) asked what impact 2017's damaging flood season had on Ginnie, especially given how many affected properties either did not have flood insurance or had insufficient flood insurance. "at is not an insignificant problem," Bright said, noting that 150,000 Ginnie properties had been affected by the floods and did not have sufficient flood insurance. Bright continued, saying, "If you have a property that has been damaged through a flood, and the property cannot get into a conveyable condition to file a claim with FHA, it does raise the risk that the issuer, if they're concentrated in that particular geographic location, could have an insolvency situation." Bright said they were currently analyzing the total impacts of the floods. Rep. Randy Hultgren (R-Illinois) asked Bright if he had any concerns about Ginnie's recent or expected growth. "We're very aware that with greater size comes greater risk, especially when your base is shifting," Bright said. However, he said that he didn't believe growth was concerning in and of itself, as Ginnie has an array of risk- management tools and the processes tend to work the same way regardless. "Mechanically speaking, our systems are volume agnostic," Bright said. Looking forward, Bright said Ginnie's focus over the next few years would be ensuring that issuers have access to the liquidity they need, having a solid idea of the value of the MSRs involved, and having a game plan for what they would do with the MSRs in the event of a problem. "It's not so much value as the quality of your counterparty that matters," Bright said. 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