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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 daily.

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 safely home.

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 economy.

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 certainty.

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.

Thank you.

*This Is Not A Transcript Of The Secretary's Speech

Content Archived: March 16, 2010

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