As he prepared to leave his post along with the rest of the Obama administration, the former president of Ginnie Mae talked about his wild ride over the past seven years.
In a telephone interview last Wednesday, Ted Tozer
talked to Mortgage Daily about his time running the Government National Mortgage Association as its president.
Before joining the Washington-based organization, which is owned by the government, Tozer worked
as senior vice president of capital markets at National City Mortgage.
During the financial crisis while he was at National City, the bank faced a liquidity crisis. It struggled to find people who would take on National City as a counterparty.
Tozer recalled one time when he was struggling to unload a put option, he instead just sold another put option to another dealer with the intention of ultimately pairing them off. But when the exercise date was reached, neither of the major dealers would accept the other as a counterparty — forcing him to take delivery of the mortgage-backed securities from one dealer then deliver them to the other dealer.
“That was bizarre,” he said. “But that showed me how the whole system had collapsed with the lack of liquidity in the system, and nobody trusted anybody.”
Tozer went on to say that National City ultimately had a multi-billion dollar run on the bank in a single day — forcing it to turn to the Federal Home Loan Bank system.
“If it would not have been for the
advance … from the Federal Home Loan Bank of Cincinnati, National City probably would have collapsed in mid-2008,” he explained.
National City was ultimately acquired by The PNC Financial Services Group Inc. in December 2008.
Tozer noted that the liquidity episode at National City made him very sensitive to liquidity levels at Ginnie’s issuers.
While he was still working at National City, Tozer said he received an email from
then Federal Housing Commissioner and current Mortgage Bankers Association Chief Executive Officer David H. Stevens letting him know that he was being considered to run Ginnie.
Stevens, who was confirmed as commissioner in 2009, was working at Freddie Mac when he first became aware of Tozer since National City was one of Freddie’s top issuers.
“He was right,” Tozer stated. “I later got an email from the White House saying, ‘hey, you know, you’re being considered for the job.'”
When Tozer interviewed with Shaun Donovan, who at the time was secretary of the Department of Housing and Urban Development, Donovan reportedly told him that he was on everybody’s list to lead Ginnie.
Tozer, who noted that he had no ties to the Barack Obama presidential campaign or to the Democratic party, was confirmed as president of Ginnie in February 2010.
Under his leadership, the company’s outstanding MBS have grown from $1 trillion in 2010 to
a record $1.77 trillion as of year-end 2016.
Tozer explained that what Ginnie does for MBS is very similar to what the Federal Deposit Insurance Corp. does for banks;
while the FDIC guarantees principal and interest on certificates of deposits for banks, Ginnie guarantees principal and interest on MBS for issuers.
He noted that at the time he came on board, most people in Washington didn’t even know Ginnie existed.
That meant that the company had to educate policymakers about what it did — a process that enabled Ginnie to become a cornerstone of the housing recovery as it grew dramatically while Fannie Mae and Freddie Mac just maintained their books of business.
Among the biggest challenges Tozer said he faced with the robust growth was dealing with counterparty risk
management, which increased as the company transitioned from having five big banks doing 80 percent of the business to 85 issuers now handling 85 percent of the business.
“That’s been the biggest challenge in trying to convince Congress and the administration
to fund us, to have the proper funding to handle that counterparty risk that we have to deal with today,” he said.
He credits the people at Ginnie for enabling it to overcome the obstacles and achieve the growth.
“I can’t say enough about the staff here at Ginnie Mae, and how they brought my vision to life,” he said.
Tozer’s last day was Friday. He said that administration appointees all tinder their resignation when a new president is elected, and the new administration has the option of asking them to stay on during a transition period. But
Tozer was not invited to stay on.
“The
Trump team did not want me to stay,” he said.
Data compiled by Mortgage Daily indicates that issuance of Ginnie Mae mortgage-backed securities has gone from $398 billion in 2010 to $526 billion last year.
Interestingly, although national residential loan originations are predicted to retreat from nearly $2 trillion in 2016 to just around $1.6 trillion this year, Tozer expects issuance at Ginnie to climb to between $600 billion and $700 billion this year.
The reason for the optimistic issuance outlook is that he sees purchase financing activity taking off and expects Ginnie to be a big beneficiary.
Among the changes Tozer hopes to see under a new administration
is access to more resources that will enable Ginnie to build out specific counterparty risk to accommodate the robust growth.
This includes more flexibility in its hiring process. Ginnie currently has a staff of just 143 people.
He is optimistic about Ginnie obtaining the additional resources since — unlike the Obama where everyone still saw Ginnie as it was in 2009 and 2010 — the Trump administration is coming in with a fresh set of eyes.
While he was diplomatic in his comments about
Nancy Corsiglia, who has been named acting president of Ginnie, he said that his replacement needs to be a technically strong person and not politically motivated.
He explained that Ginnie has a widely diverse group of stakeholders — including Congress, central bankers and mortgage bankers.
Tozer says he plans to take a couple months off, read some good books
and spend time with his family.
“It’s been an incredible ride for the last seven years,” he said.
He still plans to stay involved with housing and housing policy.
