Magazine article American Banker

MBA Wants Ginnie Mae to Let More Loans Qualify for Its Top-Quality Pool

Magazine article American Banker

MBA Wants Ginnie Mae to Let More Loans Qualify for Its Top-Quality Pool

Article excerpt

The Mortgage Bankers Association is working with representatives from Wall Street on a proposal that could make Ginnie Mae home loans more appealing to borrowers.

The MBA wants more loans to qualify as a type of Ginnie Mae security that trades easily. The so-called Ginnie Mae I securities have relatively predictable prepayment rates, so Wall Street doesn't demand higher yields to offset volatility.

Savings could be passed along to borrowers in the form of lower interest rates, according to a proposal that the MBA plans to submit to Ginnie Mae's president, Kevin G. Chavers.

"We think the proposal could create greater efficiencies for consumers," said Phyllis Slesinger, the MBA senior director spearheading the plan.

"Right now, the pricing of certain Ginnie Mae loans isn't as good as the rates offered to conventional borrowers," Ms. Slesinger said.

She said the effort was being done with input from PSA Bond Market Trade Association, which represents Wall Street investment banks and brokers. The PSA and MBA have formed a joint task force to consider "a wide range of issues," including the impact the change could have on institutional investors, a PSA spokesman said. The PSA had not endorsed the proposal as of Monday afternoon.

A spokesman for Ginnie Mae, formally the Government National Mortgage Association, said it would not comment until it received the proposal.

Ms. Slesinger said the letter could go out this week, and she is optimistic about its reception. Ginnie Mae was "interested in what we had to say" during informal discussions earlier this year, she said.

The change would affect Ginnie Mae securities that are backed by loans to people with low or moderate income. …

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