Ginnie Mae has warned seven of its MBS issuers during the first nine months of 2011 that they are in violation of agency's rules, according to an audit by the General Accountability Office (GAO). The identities of the seven were not revealed.

The secondary market agency generally issued "notices of intent to default" and gave each issuer up to 30 days to take corrective action.

GNMA officials "told us they issued most of the notices because the issuers committed an operational error, such as a missed payment, and the issuer rectified the errors in a timely manner," the GAO auditors said.

In cases of more serious violations, Ginnie will seize the government-guaranteed loans underlying the bonds.

From 2005 to 2010, Ginnie issued 46 notices of intent to default, GAO says in a report delivered to a House Financial Services subcommittee.

During the same period, Ginnie defaulted 21 issuers and seized $28.8 billion of mortgages, including $26 billion from Taylor, Bean & Whitaker Mortgage Corp. (TBW) in August 2009. (TBW field went bankruptcy about then.)

Ginnie Mae defaulted one servicer during the first-half of 2011. In October and November, the agency defaulted two more issuers that held more than $900 million (combined) in loans, according a recent independent audit by Clifton Gunderson.

 Meanwhile, 27 of Ginnie's 165 MBS issuers were on the agency's watch list at the end of June. "These 27 single-family issuers had an average portfolio size of about $4.8 billion," GAO said.

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