Nov
5
Read the rest at HousingWire.com
Ginnie Mae bonds carry the full faith of the United States government, but investors should not take that to mean the risks are lower, according to two recent mortgage-backed securitization market reports.
Barclays Capital notes that the amount of previously delinquent and now-cured mortgages in Ginnie Mae pools are raising investor concerns because of higher probability of redefaults and spotty performances from individual servicers.
Ginnie Mae does not buy or sell loans or issue mortgage-backed securities. It guarantees investors a timely payment of principal and interest on MBS backed by Federal Housing Administration and VA loans.
The BarCap analysts estimate that as much as 12% to 13% of new production Ginnie pools are backed by reperforming loans — meaning servicers worked with the borrower to turn the mortgage from delinquent to current either through a modification or some other form of loss mitigation.
Analysts added that 45% of these reperforming loans will redefault over the next two years, which would boost prepayments.
“Increasingly [Ginnie Mae] investors have been concerned by the preponderance of new issue pools with very high delinquencies shortly following issuance,” according to BarCap. This, they add, raised concerns over Ginnie valuations for mortgage derivatives.
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