Each month, National Mortgage Professional Magazine will focus on one of the industry’s top players in our “Mortgage Professional of the Month” feature. Our readers are encouraged to contact us at [email protected]
to be considered for a future “Mortgage Professional of the Month” article. This month, we had a chance to chat with Mary K. Kinney, executive vice president and chief operating officer of Ginnie Mae. As EVP, Kinney administers Ginnie Mae’s multi-billion dollar mortgage-backed securities (MBS) and Real Estate Mortgage Investment Conduit (REMIC) programs. She is responsible for managing Ginnie Mae’s daily operations, including contracting, budget and legislative initiatives, and overall risk management of the organization. Additionally, Kinney maintains liaisons with key officials and executives of housing and securities industries, the investment community, members of Congress, and other departments and agencies of the federal government. Kinney brings with her more than 20 years of experience in the MBS business, housing finance, affordable housing and commercial real estate investment. She has also managed end-to-end activities for private-label MBS at both Citicorp and the Mortgage Guaranty Insurance Corporation (MGIC). She has also managed loan origination and servicing functions in the primary servicing mortgage market.
When you graduated from St. Lawrence University, what was your degree in?
Mary K. Kinney: My specialty was geology, “rocks for jocks.” Who would have thought? In retrospect, I should’ve been a finance major. I landed in the mortgage industry by accident. I’ve been in both the primary and secondary segments of the market.
How did you become involved with Ginnie Mae?
I have been in the mortgage business for more than 25 years. I found my way to the secondary market while in Milwaukee while working for Mortgage Guaranty Insurance Corporation (MGIC) in the 1980s. I became involved with their private-label program, entitled “Maggie Mae” at the time. I cut my teeth on the concept of mortgage-backed securities (MBS) there and received a phone call from Fannie Mae in Washington, D.C. asking if I would come join them because they were struggling to get their single-family MBS program off the ground. It was a total of less than $50 billion at the time, and it’s now around $2.7 trillion. I came aboard in 1984 to bring my private label experience to bring alternatives to some of the products Fannie Mae was offering.
I spent some time on the origination side with Prudential, then re-joined Fannie Mae. Now, I’m with Ginnie Mae! I sometimes joke that I should’ve been born in the month of May because, including Citicorp’s CitiMae program, I’ve been with all the Maes.
When issues surrounding MBS fraud like the one with Lend America in 2009 arise, what is Ginnie Mae’s approach to handling them?
Ginnie Mae’s business model is based on counter-party risk. Unlike the government-sponsored enterprises (GSEs), we only take counter-party risk. We hold our lenders, who we call Issuers because they actually issue securities with our guaranty, to a high standard. They use our name to make a splash in the secondary market. We guaranty their performance; one of the things we always look at is Issuer (or lender, as we use the terms interchangeably) performance. One of the standards is that you have to be in good standing with the FHA. We received notification back in December 2009 that the FHA was going to “Pull the Eagle” on Lend America for various violations that Lend America had at the time.
Again, because you cannot be an Issuer in good standing with Ginnie Mae unless you are in good standing with the FHA, we immediately defaulted the lender. When we do this, we take possession of our assets, which in this case, were our mortgage-backed securities that were issued with our guaranty.
When a conflict like that arises, how do you ready yourself to discuss the issue?
Let me break it into two categories, in the case of Lend America, we had little notice. We received notice from the FHA that Lend America had some egregious issues against them and that they were going to default. We had to move quickly, there was no opportunity for negotiation, so we had to act swiftly.
We have a team in Ginnie Mae that’s called “Monitoring,” and they handle, along with our lawyers, the outlining of circumstances and inventory of the assets, documents that have to be physically removed. We have people on retention at all times to handle these kinds of portfolios of loans and MBS.
When something like this happens, the MBS and underlying loans that are in the process of foreclosure become part of our portfolio. We’re not set up like the GSEs to hold a portfolio. Our intention is to guarantee the performance of the Issuer. Think of us like a surety bond. We don’t want the portfolios, but we have to seize them when the Issuer is in default. We’re routinely reviewing lenders who appear to be in financial stress, that’s what our Monitoring team does.
If we see a lender that’s in distress, we approach them about their plan to get back on track. One of the things we think about is that if they default on making a monthly pass-through, we have the right to seize the entire portfolio. We would immediately step in and advance our funds to make the investor whole and would seize the portfolio. Our lenders are motivated to do anything and everything to make the monthly pass-through in order to avoid a seizure of their portfolio.
So for example, in an instance where seven percent of the portfolio is delinquent and we are concerned about the financial strain on the Issuer, we’ll have a conversation with the lender and advise them of options, one of which may be to sell their portfolio, that way, at least they’ve still get the value of the 93 percent of their healthy portfolio, which we would otherwise seize, without compensation. That’s essentially the big difference between Ginnie Mae and the GSEs. When the GSEs issue securities, they take on the credit risk of the borrower.
We take on the risk of the financial strength of the lender and if they fail, we seize the portfolio. The GSEs operate at a loan level, so the lenders don’t have much skin in the game in that regard.
Would you care to comment on the Consumer Financial Protection Bureau’s (CFPB) qualified residential mortgage (QRM) and/or qualified mortgage (QM)?
We get a lot of questions about that in our office and are looking at what the characteristics are. Given that we’re not in the credit-risk space, we don’t take a position on it. We look to the FHA and the VA to take a stance on the issue as they pertain to QM or QRM ruling under Dodd-Frank.
How were you able to meet the personnel requirements and increase the technological infrastructure at Ginnie Mae?
It’s been a testament to the underpinnings of the Ginnie Mae business model, which is a model that takes counter-party risk and not credit risk and a testament to our employees. When I arrived four years ago, there were 62 employees, which is a shockingly small number. Ted Tozer, our president, appointed by the Senate and I spent a lot of time explaining to government officials what Ginnie Mae does and how we don’t assume credit risk, how we are very low risk and generate substantial profits for the government. Congress appropriated more funds to increase our staffing, so our numbers have since expanded to around 110 employees.
We’ve been able to receive funding to modernize our infrastructure. There’s a reason you don’t hear about any hiccups with our infrastructure, our technology scales to an increased number of loans. We only had to scale for our lenders. We’ve added about 30 or 40 lenders a year. Our business model lends itself to scaling pretty regularly.
There’s a possibility that loan limits will continue with HUD support. Is there another rebirth coming in terms of volume for Ginnie Mae?
We have an ongoing dialogue with members of Congress about our funding and staffing levels. There’s been a great deal of recognition in terms of the role we play. Our challenge always is, unlike most agencies seeking more funding, is that we’re not funded from taxpayer revenues. We are funded, by Congress, from a small portion of our fee revenues–our guaranty fees, transferring of servicing fees and other administrative fees. Currently, our salary and staff expenses are running at around $18 million per year, well less than 20 percent of our fee income. Our systems are, however, prepared for more loans. We’re constantly watching the dynamic between lowering limits and whatever the GSEs do with their g-fees.
Can you comment on the Federal Home Loan Bank of Chicago partnering with Ginnie Mae?
We’re very excited about this. This is an opportunity to partner with their member banks, as well. This allows their members to have access to the capital markets directly. They can have access to the Ginnie Mae programs, a better pricing structure and retain servicing to stay active in their local communities.
What’s your family life like? What are some of your hobbies?
I’ve played competitive sports my entire life. I don’t participate much anymore competitively, but I play a lot of golf. I love the outdoors. I’ve been married for 26 years now and I actually hired my husband at Fannie Mae. He’s a mortgage professional as well. We have a home in Maryland, and I commute into Washington, D.C. I enjoy my time in the garden, and I’ve become an obsessive walker, as well.
For Valentine’s Day a few years ago, my husband gave me a shotgun, so I spend time with him shooting. I have a picture of me with my shotgun, so, when meetings go bad, I slide it across the table to our staffers and they know I mean business!
Do you feel that women don’t want as much recognition in the banking field? Have women been properly represented in both the private sector and the government sector?
This is an interesting discussion. I did a little blog piece on female executives. The mortgage industry is traditionally dominated by men. You have to learn how to play the role as a woman. Sometimes, women come on too strong early and immediately alienate everyone. They hide the qualities that make them succeed. They feel they need to dominate and overcompensate. I think women need to rely on their intuitive skills and personality in order to succeed in any industry. If you commit yourself to an industry, learn about it. Be yourself. Don’t be someone else. Sit at the table. Don’t presume you should stand back. Engage your industry … you cannot be part of the game if you’re not in the huddle.
My father instilled in me the notion of “work hard, play hard,” and I’ve always had male supervisors who have had the same outlook. The people I work with have that same drive and we just click. Over my career, I’ve always been passionate, and those around me have fostered that growth. If you’re not passionate, you’re going to burn out.
Robert Ottone is executive editor of National Mortgage Professional Magazine. He may be reached by phone at (516) 409-5555, ext. 314 or e-mail [email protected]