Magazine article American Banker

Ginnie Mae Votes for Private Enterprise: Instead of Fedwire, Agency Chooses MBS for Settlement of Securities Trades

Magazine article American Banker

Ginnie Mae Votes for Private Enterprise: Instead of Fedwire, Agency Chooses MBS for Settlement of Securities Trades

Article excerpt

NEW YORK -- A private enterprise that seeks to become the premier book-entry system for mortgage-backed securities gained a kye endorsement on Thursday from the Government National Mortgage Association, or Ginnie Mae.

The agency had been expected to announce its endorsement of a book-entry system as traders wrestle with the mountains of paper that result from the trading of Ginnie Mae securities, which represent interests in pools of residential mortgages.

Officials of the U.S. Department of Housing and Urban Development, who oversee Ginnie Mae's programs, announced they would not pursue settlement of Ginnie Mae securities trades through the Federal Reserve System's Fedwire network.

The HUD officials instead endorsed the services of MBS Clearing Corp., a wholly owned subsidiary of the Midwest Stock Exchange. MBS Clearing, through a joint venture with Chemical Bank, in March began providing a depository and book-entry settlement for some Ginnie Mae programs.

But the Federal Home Loan Mortgage Corp., or Freddie Mac, and the Federal Home Loan Mortgage Corp., or Fannie Mae, earlier chose the Fedwire as their book-entry system.

"I think the fact we're a private-sector initiative was paramount in winning HUD's endorsement," said Ronald A. Stewart, MBS Clearing vice president.

The endorsement is a clear shot in the arm for the private wire system, as Ginnie Mae has more outstanding securities than the other two agencies combined -- $186 million for Ginnie Mae compared with $77 million at Freddie Mac and $39 million at Fannie Mae, according to Federal Reserve figures for the end of the 1985 first quarter. …

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