Ginnie Mae CEO Resigns: We Saw It Coming

Oh this is getting rich.... smart man, Mr. Murin. We just noted last Wednesday how the next massive bailout will be FHA / Ginnie Mae as supported by an excellent editorial in the Wall Street Journal WSJ - The Next Fannie Mae: FHA / Ginnie Mae]. Mr. Murin is obviously no dummy and sees what is coming down the pike, and I'd be doing the exact same thing. Who wants to be sitting there in front of Congress trying to explain why things Congress is pushing for led to a massive default in his agency. Just file this news item in the back of your mind as we hit circa 2012 so we can look back and say together "who could ever have guessed how things would turn out?

Via Bloomberg

• Joseph Murin, the president of government-run mortgage bond insurer Ginnie Mae, will step down tomorrow after about 13 months on the job, according to two people familiar with his plans. Murin, who joined Ginnie Mae on July 1, 2008, plans to pursue private business opportunities, according to the people, who asked not to be named because an announcement has yet to be made.
• His resignation would be the third departure this year of the top executive for the main companies responsible for the majority of U.S. mortgage financing.
• Ginnie Mae, long overshadowed by government-sponsored enterprises Fannie Mae and Freddie Mac, has seen its business almost double in the past two years as a lack of financing options pushes borrowers into government loan programs.
• The new business has brought more risk because Federal Housing Administration loans, the main collateral for Ginnie Mae securities, have lower credit-score and down-payment requirements than private-label loans.

I'm not the only one who is telling you way ahead of time of this implosion. So when your Congresspeople tell you in a few years "no one saw it coming" make sure to vote for someone who is not an incumbent.

• “Many if not most of the new Ginnie Mae loans are very likely to default,” said Julian Mann, who helps manage $5.5 billion in fixed income securities at First Pacific Advisors LLC in Los Angeles. “You have to be out of your mind to be at the top of one of these GSEs now. Who in their right mind would wants to be in the position of managing these toxic assets?”

Basically FHA is now a slush fund for the same type of mortgage loans that got us here in the first place. We do not learn - hence we deserve our fate. No one wants to call their local representative on the carpet for their behavior, so we'll just pony up more dough as subsidization for the "new ownership class" (many of which will be back renting in 3 years after defaulting)

• The agency, which issues the only mortgage bonds to carry the “full faith and credit” of the U.S. government, packaged a record $43.5 billion in federally backed loans into securities in June. The agency’s mortgage bond volume almost doubled in the first half of this year, to $207 billion from $107 billion during the same timeframe a year ago, as the mortgage markets seized and borrowers turned to federally supported mortgage financing.
• FHA mortgages represent about half of new loans for home purchases, up from about 10 percent at the start of last year

Easy as that - 1 in 2 mortgages are now being funneled through the easiest agency to get a loan. And with the cost of living adjustments Congress passed in 2008 to get as many people as possible under government mortgages, FHA loans as high as $700Ks are now being placed in states like California.

Overlay that with FHA's original purpose of providing home loans for low income borrowers with blemished credit. Now it's just a whirlpool for everyone - including people who can afford $700K homes.

Start shaking down your kids and grandkids for their share of the bailout...

Comments

[ain't no fo...:]

Thanks Mark... I'd been wondering whatever was going on with Ginnie as it managed to stay out of the bulk of the headlines for so long... tick, tick, tick...

Aug 16 12:11 PM

[Donald Ingram:]

Kinda like closing the barn door after the horse has gone!
Rats deserting a sinking ship?
Every man for himself?
I got mine, I'm outta here!
Part of the problem - not the solution.

Aug 16 12:15 PM

[Prudent Man...:]

Good point. I have for decades watched which political insiders are leaving their political jobs for indications as to how things are actually going and not as reported by the clueless media and press.

Watch Sect'y of Defense Gates if you want to get an indication as to how Afghanistan, Pakistan, Iraq and the Guantanamo issues are progressing or regressing.

The political rats are the first to leave a sinking ship. Obama has lost three political insiders this summer with little media coverage and no explanations. That happens in every new Administration and these people are Clintonites, a group that if I were president I would keep my eyes on and not turn my back.

I enjoy watching political collectivists, in fact most politicians, self-destruct. Their reach for power always exceeds their intellectual grasp.

Aug 16 02:08 PM

[tonym:]

<<enjoy watching political collectivists, in fact most politicians, self-destruct. Their reach for power always exceeds their intellectual grasp. >> Absolutely true.

Aug 16 02:40 PM

[ebworthen:]

Financial collapses like this one eventually lead to societal collapses.

Why we keep forestalling things is beyond me, other than human nature.

We are building an ever larger house of cards that, when it collapses, will tug at the fabric of our society.

Madness, pure Madness.

Aug 16 04:47 PM

[whidbey:]

The GMNA paper (mutual funds too) are fully guaranteed by the US government. Now, of course, we have no idea what that means these days. What we do know is that no one wants to be sucked into the management of a whorehouse after being told it was a bank.

If professional management is going to avoid these GSE, it will be long before purchasers will suspect that a new Fannie or Freddie is in the making and avoid GMNAs. Current holders would sell, and we have another facet of the housing/financial problem is revealed.

What should bother us is how deliberate the destruction of our economy has been for the last two decades. This is another brick out of the wall.

Aug 16 06:51 PM

[Fitz919:]

77 bank failures so far this year, 5 on Friday, including the 6th largest ever. FDIC expects it will pay out 3.7 Billion to cover deposits, just for the 5 that failed Friday. The FDIC is really close to being broke, so they are just going to have to figure out where to print more money. We've maxed out in the U.S. last year, so some of our greenbacks are now being printed in Switzerland. I bet we could get the Chinese to print money for us.

Oh, and why did all those banks fail? Bad loans of all descriptions.

Fannie....Freddie........ all the same sinking ship.

Aug 16 10:05 PM

[jammur:]

Actually, I don't want the job, but I'd LOVE to be the one to sit in front of Congress and list item by item things they've done to cause this. I'd push it right back in their face. I don't think I'd want to be the former head of Merill Lynch sitting there, but Auto, Oil, Regional banks, and Insurance companies should (have) been eager to get in front of congress. For every major screw up affecting those industries, I'm sure I could find 1/2 dozen pieces of legislation that caused it.

Sometimes CEOs make boneheaded decisions. Sometimes congress puts a gun to their head and tells them to jump.

Sep 15 05:50 AM