Ginnie Mae is moving closer to merging the Ginnie I MBS program into the Ginnie II MBS program and now it is going to develop a blueprint to manage the consolidation.
The concept of consolidating the two MBS programs has “been well-received,” according to Ginnie Mae senior advisor Terry Carr.
In a letter to stakeholders, Carr noted Ginnie officials have been meeting with Ginnie Mae issuers and other stakeholders over the past three months to gather feedback.
While industry feedback has been favorable, investors have expressed concerns by costs involved with a transition and impact on pricing on outstanding Ginnie Is and Ginnie IIs.
Ginnie Mae officials will address the issues that have been raised in these discussions, Carr says in the July 9 letter.
“Our next step is to develop a more detailed blueprint that outlines the mechanics of how the Ginnie Mae I to Ginnie Mae II MBS consolidation would be managed. A major component of that blueprint will be determining whether a tender mechanism for investors to convert their Ginnie Mae I holdings to Ginnie Mae II securities will be necessary, and if so, how it will operate,” she said.
In the past few years, issuance of Ginnie IIs has increasingly outpaced Ginnie Is. In May, Ginnie II single-family issuance was four times the volume of Ginnie I issuance.
However, only Ginnie I MBS are eligible for TBA (to be announced) execution.
“Ultimately, the level of liquidity associated with Ginnie Mae MBS is a function of the TBA eligibility criteria,” the shareholder letter says. “The consolidation proposal is designed to modernize the current TBA eligibility criteria to represent a broader population, yet refine the profile of the deliverable MBS pools,” the letter says.