The Government Accounting Office reports that Ginnie Maes mortgage-backed security program doesnt comply with requirements of the Credit Reform Act and recommended to Congress that the agency change the budgetary treatment of its guaranty program to comply and facilitate better data analysis.
In a July 28 report issued to Chairman of the Senate Budget Committee, Sen. Jim Sasser, D-Tenn., the GAO recommended that the Office and Management and Budget require Ginnie Mae to budget for its mortgage-backed security guarantees using its guarantee issuance dates exclusively.
The Ginnies program is required to have the same budgetary treatment as other loan guaranty programs in that its guarantees must be attributed to its financing account if issued on or after the implementation of credit reform Oct. 1, 1991. Those guarantees would be attributed to its liquidating account if issued prior to that date.
The Credit Reform Act was enacted to provide a better measurement of the cost of the extension of federal credit, such as that offered by Ginnies guaranty program.
But both OMB and GAO have expressed concern over the way Ginnie is implementing its guaranty program. GAO notes that when Ginnie takes over an issuers entire portfoliowhich typically occurs when an issuer has defaulted on a payment for a securitythese portfolios sometimes include securities with Ginnie guarantees issued both before and after credit reform became effective.
The problem, GAO said, is that Ginnie pays for all guarantee costs associated with one issuer from either its financing accounts or its liquidating accounts. Those payments are based either on the default status of the issuer or the date in which the issuer first participated in the program. GAO and OMB contend that to be in compliance with the act, the costs need to be based solely on the issuance date of each guaranty commitment, which would allow Ginnie to continue analyzing data by the issuer.
