The volume of new mortgage securities insured by Ginnie Mae remained higher than it has been in more than two years in July, rising slightly on a consecutive-month basis.
At $47 billion, the total volume of new single-family and multifamily mortgage securities last month was up nearly 7% from June and more than 22% from July a year ago. Issuance was last this high in December 2016, when it was more than $49 billion.
Lower mortgage rates that have increased origination volumes are the most likely drivers of securitization gains. Stronger home buying that tends to occur in the warmer months of the year is a likely catalyst as well.
The origination and issuance gains could continue through the next couple years if rates, the housing market and the economy remain favorable, particularly if some other pending developments go as planned as well.
Ginnie Mae is making progress on its goal to improve technology in ways that could eventually allow it to more quickly process higher volumes of loans, and it has entered into a series of contracts with an estimated value of $127 million with IT firm CGI Group to that end.
In addition, the Consumer Financial Protection Bureau recently distributed an advanced notice of proposed rulemaking indicating it plans to move ahead with letting the government-sponsored enterprises’ temporary qualified-mortgage exemption expire in January 2021, or after a short delay.
If this occurs, there’s a possibility more loan volume could be driven into the government-insured mortgage market, which has a permanent QM exemption.
The exemption protects loans that have it from ability-to-repay liability regardless of whether those mortgages meet QM underwriting guidelines. In the private market, only loans that meet QM standards can obtain a safe harbor from ability to repay liability. A key determinant of QM eligibility is a maximum 43% debt-to-income ratio.