After seven years as a major guiding force at Ginnie Mae in the wake of the financial crisis, Ted Tozer is set to leave the secondary marketing agency on Friday.
During his time with Ginnie Mae, Tozer expanded the agency’s portfolio tremendously and revisited its handling of counterparty risk management. Moreover, he remained a consistent voice calling for more resources and funding for the agency at a time when demand was growing for the loan products it packaged into securities.
In an interview Monday, Tozer reflected on his accomplishments at Ginnie Mae and the challenges facing the industry and the agency in the years ahead — from the micro level (ensuring liquidity for servicing rights) to the macro (enacting comprehensive housing finance reform). The following is an edited transcript of the conversation.
What achievements would you consider to be the most significant from your time at Ginnie Mae?
TOZER: First of all, when I was a lender, the [Home Affordable Refinance Program] really hadn’t been as effective as it could have been. Using my experience as a lender, I worked with the various parties and became the administration’s point of contact for the relooking of the whole HARP program, getting the lenders and the [mortgage insurance] companies together.
Another thing I did: I was really concerned when I took this job that Ginnie Mae had two programs, Ginnie Mae I and Ginnie Mae II. You really couldn’t afford to have two programs. There wouldn’t be the liquidity. So I really wanted to phase out the Ginnie Mae I because the Ginnie Mae I to me was an old program that dated back to the 1970’s that really was out of date. When I got to Ginnie Mae in 2010, only about 40% of our business was done in the [Ginnie Mae] II program and about 60% was done in the [Ginnie Mae I program]. Today, it’s about 95% in [Ginnie Mae II].
As a lender…I was always frustrated by the fact that Ginnie Mae never seemed like it took a leadership role in the industry. It never really took the position where it was really going to support the industry more than it had to. It was like most government organizations — it did what it had to do. I really wanted Ginnie Mae to become a leader in the industry and to become an organization that’s based on customer service. We’ve been successful in building Ginnie Mae’s prominence up.
What do you see as the biggest challenges moving forward for the mortgage industry in general and for Ginnie Mae in particular?
The biggest challenge for the industry is I feel like we have to get a balanced approach. At Ginnie Mae, we really have four stakeholders: We have the borrowers, we have the lenders, we have the taxpayers because we’re guaranteed and we have the bondholders. Everyone wins and loses. What does it take to have good protection for the consumer without driving up costs or driving lenders and bondholders out of the market? The key is finding a really good balance among the stakeholders to make the industry work as effectively as possible.
As far as Ginnie Mae, I think Ginnie Mae’s biggest challenge is we’ve been too successful. We have grown phenomenally. We did so much that was transformative for the industry, but we did it without really any hiccups. That’s why I had a tough time getting the resources and getting the support to really be able to set Ginnie Mae up with the proper staffing and the flexibility we need to be successful. We really have to be able to educate people about what Ginnie Mae is all about…with the really limited resources that we have.
What is your take on the state of mortgage servicing rights financing?
We have to create as much liquidity as we can for MSRs. Once you have a very liquid asset, it’s easy to get people to take it as collateral. The biggest challenge is to work on trying to make sure that MSRs are as transferable as possible. And that means working with regulator and the FHA to try to understand exactly what liability there is and what it means to be a servicer of [Federal Housing Administration, Department of Veteran’s Affairs and Rural Housing Service] product.
A challenge we have too is this indication of the movement away from the banking sector. In the past, MSR financing was not as big of an issue because banks would normally just use FDIC-insured deposits or CDs to fund their mortgage operations and their servicing operations. Now the only thing the mortgage bankers have as assets is MSRs. It’s forced us as an industry to try to allow the independent mortgage bankers to liquefy their balance sheets as much as possible. What we’re trying to do at Ginnie Mae is to support the industry through the various evolutions that are occurring. That’s why MSR financing is so important, and that’s why we’re trying so hard to make it as successful as possible. We’re trying to grow the mortgage industry until the banking sector decides to come back to the mortgage banking business in the future.
What are the lessons that have been learned about housing policy from the Obama administration that you would share with the incoming Trump administration?
The thing I would tell them is the mortgage process is a relatively complicated process and it truly is an ecosystem. It’s really something that’s got to be kept in balance, and once it gets out of balance then you can have problems with access to credit and costs to credit. I would encourage them to look at this whole concept of the costs and repercussions of trying to make changes.