Ginnie Mae's additional disclosure data on Federal Housing Authority (FHA) single-family pools has shown just slight prepayment variances in characteristics that generally change the convexity profiles of specified pools.

Ginnie has begun to offer original LTD, loan purpose and property type on all fixed-rate single-family MBS. These are aside from disclosing WAC, WALA, geographical distribution, etc. The agency will also provide additional information on issuer details, origination year and geographic distribution for new issue pools. However, the added information will not be available for recently issued hybrid pools.

"A first cut of this information reveals limited prepayment differences across LTV bands, loan purpose categories and property types," wrote analysts from Credit Suisse First Boston in a recent report. "These muted variations limit opportunities for picking up convexity in specified GNMA pools versus TBA."

By contrast, considerable prepay speed differences across these characteristics are seen in the conventional MBS sector, CSFB said.

While the additional disclosures from Fannie Mae and Freddie Mac led to dramatic growth in the specified pool sector, the Ginnie specified market will probably benefit less from the new information available, said researchers from Citigroup Global Markets. This is because Ginnie borrowers are more homogenous compared to those in the conventional market. Aside from this, the counterintuitive behavior across LTVs might have some "idiosyncratic influence" affecting Ginnie borrowers. This factor might cause investors to be hesitant about specified paper in the Ginnie sector. However, it would take next quarter's disclosure to see whether this concern is valid.

Disclosure variables

In its report, CSFB also found that Ginnie's 30-year pools are characterized by high-LTV and purchase-money loans, with LTVs in the 93% range. Further, the number of pools with LTVs less or equal to 80% is negligible, given that the majority of loans are in the 80% to 95% LTV bucket, with a bias on the higher end. In direct contrast, Fannie Mae and Freddie Mac pools usually have LTVs of less than 80% as well as a higher percentage of refinance loans.

Meanwhile, lower LTVs and refinance borrowers characterize GNMA 15-year pools. Balances of refinance loans are about 5 times to 10 times more compared to purchase-money mortgages across vintages. Also, the LTVs on GNMA 15-year pools are 10% to 12% lower than their 30-year counterparts. However, like similar 30-year collateral, they also mostly fall under the 80% to 95% LTV bucket.

Citigroup said that the average LTV of a GNMA borrower is 94%. This is not surprising considering that the minimum down payment for an FHA mortgage is 3% and usually 0% for the Department of Veterans Affairs (VA).

CSFB also noted that GNMA pools have lower average loan balances compared to Fannie and Freddie pools. Within the Ginnie sector, 30-year pools often have higher average loan balances versus 15-year pools. The agency's 30-year 2003, 2002 and 2001 vintage pools have average loan balances ranging from $101,000 to $125,000 while similar 15-year product have average loan balances of only $70,000 to $88,000.

Prepay differentials

Citigroup observed that, unlike their conventional counterparts, higher LTV buckets in Ginnies prepaid faster than lower LTV buckets in the last year for many cohorts. Citigroup believes that low-LTV Ginnie borrowers may have other impairments aside from LTVs, which are only slightly above the conforming limit of 80%. In contrast, high-LTV borrowers may be taking GNMA loans rather than conventional loans to maximize the LTV opportunity. The exceptionally strong housing sector and an increase in popular affordable lending programs - such as Fannie's "Expanded Approval" and Freddie's "Affordable Gold"- may be helping high-LTV borrowers qualify for conventional loans, analysts noted.

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