Ginnie Moves Could Include Tender Offer, Platinum Revamp

Changes to the Platinum program or a tender offer for Ginnie Mae Is are among the strategies Ginnie and stakeholders are examining the pros and cons of in trying to avoid a possible future liquidity concern due to shrinking Ginnie I volumes, a Ginnie capital markets executive told this publication.

The tender offer is one example of a possible way to address the risk posed to holders of outstanding Ginnie Is as the possibility of combining the Ginnie I and II programs to avoid liquidity problems is explored, John Getchis, senior vice president, office of capital markets at Ginnie Mae told this publication.

“Conversion is always the challenge,” he noted in a recent interview at the Mortgage Bankers Association’s secondary market conference. He said among the considerations Ginnie Mae and stakeholders have been pin down in discussing this are the tax and accounting implications.

The Ginnie Mae Platinum program, in which several securities are combined into a larger pool with the aim of making prepayments more predictable, also might prove helpful in conjunction with discussions regarding the possibility of combining Ginnie Is and IIs, Getchis said.

Ginnie is considering revamping the Platinum program, which he said needs to be more cost-effective. Getchis said among the prerequisite improvements that would need to be made to it before it could be employed to help with the Ginnie I and II combination proposal would be parity in disclosures.

Ginnie IIs have been “evaporating” a bit each month as Ginnie IIs increase at about twice that rate, he said.

Ginnie Is have been favored because the pools are large and they provide flexibility attractive to originators when it comes to coupons. They also minimize balance sheet risk relative to the mortgage servicing rights of regulated entities under global accounting rules.