Ginnie Mae Investors Symposium
Remarks as prepared for delivery by Secretary Mel Martinez*
New York City, New York
Tuesday, March 25, 2003
Good morning. I am very pleased to welcome you to the Ginnie Mae
Investors Symposium. Thank you, Bob, for your very generous introduction.
I appreciate the generosity of the New York Stock Exchange in hosting
us here today.
I want to acknowledge Ronnie Rosenfeld for the leadership he brings
to Ginnie Mae as its president. Ronnie knows government, and brings
a wealth of public service experience to his job. He knows the private
sector, too - in particular, the real estate and financial
services industries. He is an invaluable resource who I rely on
Ronnie has assembled some of the nation's leading economic, governmental,
and financial experts on housing and investment, and we look forward
to their presentations today.
This is going to be a critical week in the military campaign in
Iraq, and as we have already seen, a tough week as well. The men
and women of the Armed Forces will remain in our prayers until the
Iraqi people have been liberated and every soldier has returned
At the same time we work to accomplish our goals in Iraq, the President
has instructed the Cabinet that we must continue to focus on the
important work here at home. That effort begins with strengthening
our economy and making sure it operates smoothly during this time
of uncertainty. This is why the President's plan for stimulating
economic growth - with its focus on creating and securing jobs,
accelerating and sustaining our recovery, and increasing the standard
of living for workers - is one of our top priorities.
As the President has said, "We cannot be satisfied until every
part of our economy is healthy and vigorous."
We see encouraging signs of economic progress. The nation is in
its second year of growth. Interest rates are the lowest in 37 years.
Yet, while the President's efforts have led the economy into recovery,
he will not be satisfied until we move beyond recovery and into
lasting prosperity. The President's jobs and growth plan will boost
the economy at a time when just such a boost is needed.
Our economic stimulus package took a major step forward last week
when the House passed the full $726 billion tax cut requested by
the President. The Senate expects to take final action on the plan
tomorrow - its version is nearly identical. Congressional passage
of a budget blueprint that preserves the Administration's agenda
virtually intact is a tremendous step forward for this package,
and a great victory for the President. More importantly, it is a
victory for American families and for every investor.
A central element of the plan is the complete elimination of the
double-taxation of dividends. Very simply, the President believes
that we need to encourage business owners to invest for growth,
not punish them. The double taxation on investment makes it difficult
for companies to hire new workers, for taxpayers to save for their
retirement, and for the economy to grow and create jobs.
The dividend exclusion will encourage investment by injecting more
than $20 billion into the economy in the first year after adoption.
As a direct result of ending the double taxation of dividends, more
than 430,000 new jobs will be created in the first 18 months after
the plan is enacted.
The dividend exclusion will also benefit anyone who invests in
the stock market. Analysts at Lehman Brothers, Wells Fargo, and
other private institutions say the dividend exclusion would boost
stock prices between 3 and 15 percent. In an $11 trillion stock
market, that means upwards of $1 trillion in new wealth for stockholders.
For these reasons, and the simple fact that it will help restore
confidence in the stock market, ending the double taxation of dividends
remains an essential piece of the President's jobs and growth plan.
Certain groups within the affordable housing community have expressed
concern that the dividend exclusion would have unintended consequences
to the Low-Income Housing Tax Credit. The tax credit is a major
federal program for financing new and rehabilitated rental housing.
Some have suggested that enacting the dividend exclusion would
cause a drop in the number of affordable housing units being developed.
The Administration, including our analysts at the Treasury Department,
disagrees. We believe that the overall benefits of job creation
and economic growth generated by the stimulus package will mitigate
any potential impact on the Low-Income Housing Tax Credit.
In fact, a study recently released by the Mortgage Bankers Association
of America concluded that failure to enact the plan may have a greater
impact on low-income housing if lower corporate profits lead to
a decline in investment.
The job creation and growth generated by the President's plan will
help to strengthen every segment of the American economy. And of
course, that includes the housing industry, which continues to be
a strong economic force.
Where many sectors of the economy have performed below expectations
over the past two years, the housing market has remained extremely
strong. Housing was key to bolstering our economy in the months
following the terrorist attacks of September 11, 2001. Housing helped
to cushion many areas of the country from recession, as home sales
and refinancings pumped hundreds of billions of dollars into the
Looking ahead, economists say this could be the second-strongest
year ever for home sales and the second-best year on record for
refinancings. In a speech earlier this month, Federal Reserve Chairman
Alan Greenspan predicated that, while home prices could recede somewhat
given their substantial climb in recent years, the housing market
will remain healthy. In his words, "A sharp decline, the consequences
of a bursting bubble
seems most unlikely."
Ginnie Mae is important to the strength of the housing market,
and to HUD's ambitions of making affordable homeownership an option
for every family looking to create their own "American Dream." We
are proud that Ginnie Mae has its home at HUD. We think the agency
has a tremendous story to tell.
Mortgage-backed securities are not unique, but Ginnie Mae securities
are; they are the only mortgage-backed securities to carry the "full
faith and credit" guarantee of the United States Government. That
promise means something, and the government guarantee is what attracts
many investors to Ginnie Mae. At a time when there is so much uncertainty
in the world, investors appreciate the fact that Ginnie Mae is a
Ginnie Mae is a beacon of dependability and responsibility within
the federal government. It accomplishes its mission with minimal
credit risk to the government - and at no cost to the taxpayers.
As members of the investment community, you have a critical role
in Ginnie Mae's success. As a result of the investments that you
and others make each time you purchase a Ginnie Mae security, 1.5
million families became homeowners last year. Since its founding
in 1968, Ginnie Mae has guaranteed more than $2 trillion in mortgage-backed
securities and provided affordable financing for more than 28 million
low- and moderate-income households.
Ginnie Mae is integral to the ambitious housing agenda being implemented
by President Bush.
The President and I are committed to helping more families become
homeowners - and we want more of those families to be minorities.
Homeownership reached record levels last year: 68.3 percent of all
Americans own their own homes. This is important because homeownership
helps families build financial and personal security. It creates
community stakeholders. It generates economic strength that fuels
the entire nation.
Homeownership is a priority for all these reasons and many more.
Yet, we see a persistent gap between the homeownership rates of
minorities and non-minorities. By a significant margin, minority
families are less likely to own their own homes.
Our Administration is focused on closing the gap. Last year, the
President set a bold goal of creating an additional 5.5 million
minority homeowners by the end of this decade. HUD responded by
launching our Blueprint for the American Dream Partnership, and
every segment of the housing industry has joined with us to help
meet the President's challenge.
Ginnie Mae has stepped up to do its part. Today, I want to announce
two new programs the agency has crafted to help minority families
own their own homes and a third initiative that provides investors
with a valuable new tool. The first creates new homebuying opportunities
by combining the resources of Ginnie Mae with those of FHA.
Just two weeks ago, HUD announced that we were expanding our offerings
of adjustable-rate mortgage products on FHA-insured mortgages. Consumers
would be able to choose mortgages with periods of three, five, seven,
or ten years during which the interest rate would be fixed. Homebuyers
would have the security of knowing their payment could not increase
during that time.
Beginning in October, Ginnie Mae will offer a mortgage-backed security
guarantee program for the FHA hybrid ARM mortgages and the new three-year
hybrid ARM offered by the Department of Veterans Affairs. The new
FHA and VA products will offer borrowers a fixed interest rate for
the initial three, five, seven, or ten-year period, followed by
a capped, adjustable rate.
The program will address investor demand for a securitized hybrid
ARMS investment, while benefiting as many as 40,000 families a year
- especially first-time homebuyers and the families of active
veterans. This represents yet another financing tool and another
option for making affordable homeownership a reality.
Another way we are working to close the minority homeownership
gap is by drawing additional mortgage lending into traditionally
underserved communities. Ginnie Mae will do this by expanding the
geographic reach of its Targeted Lending Initiative.
The Initiative offers issuers a range of incentives to lend within
underserved areas. Up until now, these areas have been confined
to central city regions or Native American lands. But our expansion
will bring the Targeted Lending Initiative into the colonias
along the U.S.-Mexico border. Colonias are small, unorganized
communities that frequently lack decent housing and drinkable water.
Ginnie Mae will reduce its guarantee fee by up to 50 percent in
colonias communities in order to spur housing development.
Finally, beginning next January, Ginnie Mae will disclose new data
on the loans underlying its mortgage-backed securities. The agency
will offer additional detail on the loan pools underlying both its
single-family and multifamily securities, with the goal providing
investors with new information to better forecast prepayment speeds.
A Ginnie Mae investment offers a tremendous return - for investors,
of course, but even more importantly, for families, for their communities,
and for the nation as a whole. When you invest in Ginnie Mae, you
are investing in the American Dream. I want to thank the financial
community for your part in building that dream for others.
Our push for Congress to adopt the President's jobs and growth
plan and our focus on lifting more Americans into homeownership
are rooted in a singular purpose: this Administration's commitment
to making America strong and full of possibilities for each one
of our citizens. Challenges no doubt lie ahead, but we are prepared
to meet them. And with the help and support of the individuals and
institutions represented here today, America will be prosperous
well into the future.
*This Is Not A Transcript Of The Secretary's Speech
Content Archived: March 16, 2010