Ginnie Mae chief urges more mortgages

Posted by Charles D

May 1, 2009

Talk about historic lows. I can guarantee that mortgage rates will never get any lower than they are today. A recent article in the Pittsburgh Gazette concluded Ginnie Mae’s president’s similar feelings.

The head of Ginnie Mae yesterday urged homeowners to take advantage of mortgage rates near 60-year lows by refinancing, saying reports of rampant foreclosure problems in Michigan, Ohio, Florida and other troubled housing markets have given people a dimmer view of the economy than is merited.

“It’s a state of mind. It’s fear, and I personally think it’s not justified,” Ginnie Mae President Joseph J. Murin told the Pittsburgh chapter of the Financial Planning Association.

“On the whole, there are a lot of great markets in the country.”

Mr. Murin, a Westmoreland County native who started his career as a loan officer for what is now PNC Bank, said rebuilding the housing market was crucial to reinvigorating the economy. The U.S. unemployment rate stands at a 26-year high of 8.5 percent, as 13.2 million Americans are out of work.

The grim statistics explain why a recent poll by Realtor.com concluded that about 50 percent of Americans think they or someone they know could face foreclosure in the next six to 12 months.

“That’s an incredible amount of doom and gloom,” Mr. Murin said. He believes that the pessimism is overdone, adding, “I’m somewhat of a realist but certainly an optimist.”

Refinancing would boost the economy by lowering monthly mortgage payments for borrowers, Mr. Murin said. More importantly, it would give federal policymakers a clearer idea of how many problem loans remain and what to do about them.

“The more we can refinance, the better the picture will clear up for us,” he said, in an interview after his speech.

Government-owned Ginnie Mae has been undergoing a growth spurt in recent months, as less qualified home buyers who can no longer obtain easy money on the open market return to federal mortgage programs sponsored by the Federal Housing Administration, the Department of Veterans Affairs and other government agencies.

Ginnie Mae guarantees the mortgages, making them more attractive to investors who buy them through mortgage-backed securities. When investors, including the Federal Reserve, purchase the mortgages, proceeds are used by the financial institutions that issue the government-backed loans to issue more lending.

The Fed has committed to buying $1.2 trillion of mortgage-backed securities to increase the amount of money available for new loans.

Ginnie Mae issued $89.7 billion in mortgage-backed securities in the first quarter, up from $38.9 billion in the year-ago quarter. “We are stable, secure and steadily growing,” Mr. Murin said.

Many economists believe that the enormous sums of money the federal government is using to stimulate the sagging economy inevitably will lead to inflation and higher interest rates. Mr. Murin expects that interest rates will increase substantially, but he does not know when.

“When do you think we’ll see a [30-year mortgage] rate under 5 percent again?” he asked. “People a few years from now will look back and say, ‘woulda, coulda, shoulda.’ ”

Mr. Murin advised financial planners to be prepared to help their clients with reverse mortgages, which allow homeowners 62 and older to convert a portion of the equity in their homes to cash without having to sell their homes.

He said reverse mortgages would make increasing sense for homeowners in their 70s or older who are living longer and whose retirement savings have been squeezed by the stock market’s fall and rising health care costs.

“I think more and more people will be coming to you asking about them,” he said.
Len Boselovic can be reached at lboselovic@post-gazette.com or 412-263-1941.