Gestation repo

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Gestation repo

A reverse repurchase agreement between mortgage firms and securities dealers. Under the agreement, the firm sells federal agency-guaranteed MBS and simultaneously agrees to repurchase them at a future date at a fixed price.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Gestation Repo

A repurchase agreement between a mortgage provider and a security dealer. In a gestation repo, the mortgage company sells agency securities to the dealer and agrees to buy them back at a stated price at a certain point in the future. This provides a profit for the security dealer and short-term funding for the mortgage provider. See also: Double sale.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
Wall Street calls them gestation repos. They both mean that the funding source chooses to temporarily take ownership of the loan from the mortgage company, yet the mortgage lender maintains responsibility for sale and delivery of the loans, as well as servicing of the loan, pending settlement.
Investment banking firms have been aggregating large blocks of loans awaiting securitization and selling participations in gestation repos to institutional investors starved for more yield on their short-term investments.
As needed, the mortgage banker could move the loan from this warehousing source to a gestation repo.
The gestation repo offers a lower rate, once the collateral is available to the document custodian.