Last week Ginnie Mae announced changes to its buyout program in a move that Street observers say will dampen the prepayment volatility of the sector, a clear positive for GNMAs issued at the beginning of 2003.

The agency said last Tuesday that for mortgages placed in pools issued beginning Jan 1, servicers will only be allowed to repurchase delinquent loans if they have missed three consecutive payments. This differs from current criteria, that allows issuers to buy out loans that have missed just a single payment if it has remained uncured for four consecutive months. The new rule is not retroactive so the less restrictive buyout rules are in effect for pools issued before 2003.

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