Ginnie Mae president Alanna McCargo said on Tuesday that the liquidity challenges faced by nonbanks are a critical issue facing the U.S. government’s mortgage system considering their increasingly important role in the space, and that supporting nonbanks with additional credit facilities will be a priority for the future.

McCargo discussed the matter during a live conversation with Dennis Shea, the executive director of the J. Ronald Terwilliger Center for Housing Policy at BPC.

“There were a lot of people at the [beginning of the COVID-19 pandemic] that were asking for the government to figure out ways for the nonbanks to tap into some of the other liquidity facilities that are available to the banking sector,” McCargo said. “That didn’t get where it needed to get.”

She went on to call nonbank liquidity the “biggest challenge of our time, especially now, because we are not in a 2-3% interest rate environment.”

The cost for nonbanks to borrow in a market with very little refinance activity is very high, and accounts for a notable stress on the government mortgage system, McCargo explained. That’s why determining the course for nonbank facilities requires collaboration with other departments at the federal government, she said.

“We’re thinking about and focused on this every single day working with our partners at [the Department of the] Treasury and elsewhere, to figure out […] what ways the government could support, in the future, a more robust facility for the nonbanking sector.”

Something that remains to be determined is how to support these kinds of institutions, particularly when a future crisis comes along, she explained.

“Speaking for myself, probably one of the biggest things that we need to figure out – we do not need to enter another crisis [or] downturn of any kind and not know how we’re going to support these institutions,” she said. “These institutions are incredibly important to the system and to the constituents that we all serve. And so, their failure would be a major problem for all of us. So, I think we just have to figure out what that’s going to look like, and that’s been some of the work we’ve been very focused on with our colleagues.”

McCargo also spoke about other priorities including the Biden administration’s focus on housing equality, the federal bank risk-sharing program and multifamily affordability, among other topics.