Last week Ginnie Mae announced enhancements to its MBS disclosures making it easier to determine the actual cause for relatively accelerated prepayments in its securities.
Starting in December, the agency will start reporting the number of mortgages and the principal balance that are paid off in full by borrowers, repurchased by issuers in cases of delinquency or liquidated because of foreclosure. Ginnie will also report information about loans that are 30, 60, 90 or more days delinquent as well as the unpaid principal balance of interest rate buydown loans backing its MBS.
These increased disclosures would illuminate the reasons for the relatively fast GNMA prepaysments, analysts said. Art Frank, head of mortgage research at Nomura Securities, explained that fast GNMA speeds could be explained either by strong home price appreciation or increased buyouts and defaults. Although the new disclosures would not be helpful in terms of quantifying housing turnover versus refinancing activity, it would allow analysts to identify prepayments caused by either foreclosures or buyouts. "There is no question that Ginnie borrowers have weaker credit compared to Fannie Mae and Freddie Mac," Frank said. "When we get this data, we will be able to determine whether this is a major factor in the difference in prepayment speeds."
Additionally, UBS analysts said that the increased disclosures would also shed additional light on the differences between FHA and VA buydowns as well as offer more information about the potentially faster Ginnie speeds resulting from Hurricane Katrina. Comparing the principal paydowns on pools with high Louisiana, Mississippi and Alabama concentrations to more generic pools will help in assessing the hurricane's impact, allowing analysts to further break down paydowns by pure prepayments, defaults and delinquencies.
Ginnie Mae's Director of Securities, Policy and Research Steve Ledbetter said that disclosing information about unscheduled principal paydowns, delinquency status and buydowns is one of the most significant enhancements that Ginnie has made in its disclosure initiative, leading to better secondary market pricing.
"These items, which add granularity with respect to understanding the prepayment behavior of Ginnie securities, are a direct response to the conversations we have had on an ongoing basis with the Street and investors," Ledbetter said.
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