Ginnie Mae and the Securitization of Federally Guaranteed Mortgages
CBO describes the securitization programs of the Government National Mortgage Association (Ginnie Mae) and compares its baseline budget projections for Ginnie Mae with outcomes under a scenario of severe economic stress.
The Government National Mortgage Association (Ginnie Mae), a part of the Department of Housing and Urban Development, works to attract capital to the market for federally insured mortgages. It does so by guaranteeing the timely payment of principal and interest on mortgage-backed securities (MBSs) that private financial institutions create from mortgages that are insured or guaranteed by other federal programs.
Ginnie Mae’s guarantee operations have increased significantly in recent years. In addition, the types of mortgages included in the MBSs that Ginnie Mae guarantees—and the types of lenders that issue those MBSs—have shifted in ways that could increase Ginnie Mae’s exposure to the risk of losses on its guarantees.
In this report, the Congressional Budget Office provides an overview of its baseline budget projections for Ginnie Mae and analyzes a scenario in which Ginnie Mae could be exposed to losses in a period of severe economic stress.
In its July 2021 baseline, CBO estimates that new guarantees issued by Ginnie Mae in 2022 will produce a budgetary savings of $2.2 billion in that year (using the measures for the cost of federal credit programs specified in the Federal Credit Reform Act).
In the stress scenario—which represents the worst 1 percent of potential economic outcomes over the coming decade—financial institutions that issue Ginnie Mae–backed MBSs would fail at higher-than-expected rates. Losses on the mortgages underlying those securities would also be larger than expected. Under that scenario, Ginnie Mae’s new guarantees in 2022 would not produce budgetary savings but instead would increase the deficit by $3.0 billion in that year, CBO estimates.