When the changes are implemented, the GNMA II security will more closely resemble the agency's
GNMA I security, a flagship of the mortgage finance market for more than 30 years.
CPR-6 CPR-6 8% 6.77% 3.9 8.38% 5.61% 9% 15.50% 7.7 16.28% 10.41% 10% 29.34% 9.3 25.35% 23.64% 11% 41.35% 11.6 49.21% 43.83% 1 Rates Expressed as Percent of PSA Index FIGURE 2 Comparable Conditional Repayment Rates Mortgage-backed securities with 30-year, 8% mortgages: WAC(*) WART(**) CPR-3 CPR-6
GNMA I 7.5s issued 1/87-12/88 8.0% 285.9 9.5 7.2 Mod.
However, to facilitate the implementation of the REMIC, MBA has heard that GNMA plans to mandate that
GNMA I remittances be transmitted to security holders utilizing the ACH debit by a centralized processing agent.
Unlike the other secondary market agencies (prior to the adoption of their acknowledgment agreements), GNMA has expressly permitted the pledging of GNMA servicing provided the terms comply with the relevant terms of the GNMA Mortgage-Backed Securities Guide (Section 3-4 for
GNMA I program and Section 5-8 for GNMA II program).
Wall Street dealers seem to have a fixation with purity, at least when it comes to their good delivery guidelines for settlement of to be announced (TBA) trades for the
GNMA I pool program.
(
GNMA is the Government National Mortgage Association, a federal government agency.
Not surprisingly, given GNMA's focus on government-backed loans, the HMDA data indicate that
GNMA is supporting home purchase loans made to low- or moderate-income, and to a lesser extent minority households, relatively more often than are other secondary market institutions.
Mortgage-backed, pass-through securities guaranteed by GNMA are risk weighted at 0 percent because
GNMA is explicitly backed by the full faith and credit of the United States.
Through IPADS and the expert system, GNMA has vital information to help address problems with troubled issuers if it needs to; however, it is preferable for all concerned if such action by
GNMA is not required.
Because of this volatility, the likelihood of an institution defaulting its portfolio to
GNMA is greater for the smaller portfolio groups.
Also, the risk associated with
GNMA is not there like it was in the Texas era.
Although,
GNMA is technically a GSE - like its brethen Fannie Mae and Freddie Mac - it is more secure than most because both FHA insurance and VA guarantees form a solid foundation underneath the guaranty on every Ginnie Mae security.
