Ginnie Ready to Do Excess Servicing
Ginnie Mae hopes to start securitizing excess servicing fees starting in October of this year, a senior Ginnie Mae executive said at the Western States Loan Servicing Conference here.
The program, details of which were outlined in an August 12 memorandum from Ginnie Mae, will allow issuers to securitize that portion of the servicing spread that is above 44 basis points on Ginnie Mae II deals that were issued before July 1, 2003. That portion above 19 basis points can be securitized on newer Ginnie Mae II deals.
The Ginnie Mae II program allows multiple-issuer pools to be assembled, which in turn allows for larger and more geographically dispersed deals, the agency said. It also facilitates the securitization of smaller pools of loans.
In older pools, one Ginnie Mae transaction might include mortgages with coupon rates ranging from 6.5% to 7.5%. But in new Ginnie Mae II transactions, that band has been narrowed to 50 basis points. So the same security would only be backed by loans with coupon rates of 6.25% to 6.75%.
Michael Garcia, director of single-family housing for Ginnie Mae, said the securitization of excess servicing spread represents a big change for the agency, which guarantees securities backed by government-insured home loans.
"It's exciting for those companies that want to take risk off their balance sheets," Mr. Garcia said during the conference, which is hosted by the California Mortgage Bankers Association. "Our intent is to have a program in place by October of 2004."
Reducing the servicing fee does create a concern that lenders managing Ginnie Mae loans will have "less skin in the game," he said. But Ginnie Mae is taking a number of steps to ensure that servicers maintain adequate resources to handle their portfolios.
He said Ginnie Mae will limit the program to companies that meet standards for financial strength, good servicing practices and sound loss mitigation.
In the August 12 memorandum from Ginnie Mae executive vice president George Anderson, the agency said that the program will give the mortgage-backed securities marketplace the "first non-negotiated and fully standardized structure for the securitization of excess servicing." The securities are being knick named "XMBS" transactions. Like other Ginnie Mae Securities, the XMBS transactions will carry the full faith and credit of the U.S. government.
Separately, he said Ginnie Mae expects 2004 to shape up as another powerful year for securitization, though volume will fall short of the 2003 record.
Ginnie Mae expects to securitize $158 billion of loan pools this year, down from $216 billion last year and $175 billion in 2002.
Mr. Garcia said that the agency's new website tool, Ginnie Net 6.0, must be used for pools issued during or after September of this year.
Also speaking at the conference, Marti Varnum, loan administration officer with the Department of Veterans Affairs, said that the VA is working on a redesign of its loan servicing procedures.
She said the mission of the redesign is to better serve veterans and the VA's industry partners by standardizing procedures, maximizing the elimination of paper, and allowing two-way electronic access to information via the Internet.
She said a proposed regulation to implement the reforms should be released in the near future.
Servicers are particularly interested in standardization of requirements across the VA's regions.
"We know that is a problem. What answer you get depends on what office you talk to," she said.
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