"It's not just the CFPB or Fannie and Freddie's rules or Treasury's rule's or Ginnie Mae, who's the servicer for FHA—you've got 584 different state and local rules too. So you're trying to make sure you abide by all these different rules, and it just gets very complicated, very expensive, so for us in FHA, we've priced FHA for the risk we see in FHA, and so we've got a higher price than other people so customers are going to other places," said Watters.
Independent lenders have picked up the FHA slack from big banks but that comes with added risk for which Ginnie Mae is ill-equipped, according to Ginnie Mae's own president, Ted Tozer.
"Today almost two-thirds of Ginnie Mae guaranteed securities are issued by independent mortgage banks. And independent mortgage bankers are using some of the most sophisticated financial engineering that this industry has ever seen," said Tozer in a speech Monday in Arlington, Virginia. "We are also seeing greater dependence on credit lines, securitization involving multiple players, and more frequent trading of servicing rights—all these things have created a new and challenging environment for Ginnie Mae.
Frankly, as we look forward to the future, I do not believe that we have a large enough engine to deal with the steep hill in front of us. In other words, the risk is a lot higher and business models of our issuers are a lot more complex. Add in sharply higher annual volumes, and these risks are amplified many times over."
Ginnie Mae has asked for a $5 million increase in its budget, but so far Congress has denied it. Combined with the fact that some of these independent lenders are very small, that only increases risk.