Ginnie Mae reported a $1.2 billion profit from its secondary market operations in fiscal year 2011 — up 84% from FY 2010 — due to lower loss provisioning.
Ginnie Mae president Ted Tozer told reporters Wednesday that he "beefed up" the agency's loss reserves by $600 million in FY 2010 and income was down slightly that year.
"We built the reserve up," he said, discussing his first year at the agency. But in the end it was not necessary to add to the reserve this year.
"Our business is simple, our approach to risk-taking is conservative, and our ability to finance government-insured mortgages is helping to keep the housing market afloat," Tozer said.
The Government National Mortgage Association had $16 billion in retained earnings and $800 billion in loss reserves as of September 30 -- when FY 2011 ended.
Nearly half of the reserve is expected to cover possible losses on the GNMA servicing portfolio held by Taylor Bean Whitaker. The Ocala, Fla., mortgage banking company is in bankruptcy and its top executives have been convicted of fraud and sentenced to prison.
Tozer noted that Ginnie officials should have a clearer idea of the possible losses on the TBW portfolio in the next few months.
GNMA guarantees MBS that are backed by Federal Housing Administration, Department of Veterans Affairs and Rural Housing Services guaranteed loans.
Ginnie Mae issuers sold $350.3 billion of GNMA MBS to investors in FY 2011, down 15% from the previous fiscal year.
Ginnie Mae MBS issuance peaked at $418 billion in FY 2009 and fell slightly in FY 2010 to $413 billion.