SAN FRANCISCO - Ginnie Mae is set to roll out a program this December that will allow GNMA II issuers to securitize the excess servicing fees on their portfolios, said officials from the Agency at the Mortgage Bankers Association's 91st Annual Convention & Expo. This does not apply to GNMA Is, however.
Through the new program, a servicer would be able to take a portion of the servicing fee and securitize it, rather than hold the excess on its balance sheet. For instance, a GNMA II security with a 6.25% interest could be pooled into a 5.5% security, leaving 50 basis points of excess for securitization.
This type of securitization represents a product of a change in Ginnie Mae policy. In January 2003, Ginnie Mae reduced the minimum number of basis points to 19 from 44 basis points that issuers of GNMA II securities should set aside for servicing. According to a release announcing the change, Ginnie Mae said the move was made so that these issuers will have increased flexibility to securitize.
This new program comes after the launch of the agency's Stripped Mortgage-Backed Securities Program last July. This stripped product is created from the interest- and principal-only carve-outs through a grantor trust structure, and not from a typical REMIC platform. The trust supposedly provides more liquidity to the strips that are made. Both Freddie Mac and Fannie Mae also have a similar program (see ASR 7/19/04).
Officials from Ginnie Mae said that the stripped MBS program would provide good guidance for pricing the newest product. The launch might even pave the wave for similar inroads in the GNMA I program. However, fees set aside for servicing should be reduced for GNMA Is as well before this type of securitization could be done.
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