Ginnie Mae has repurchased $4.5 billion of delinquent loans out of securitized pools this year in an effort to reduce losses on servicing portfolios it inherited from LendAmerica and other defaulted issuers.
Instead of paying Ginnie Mae MBS investors 5% to 6% interest on delinquent loans, the secondary market agency dipped into its U.S Treasury investments and purchased the notes for itself.
"The economics worked out well for us," Ginnie Mae president Ted Tozer said. Now, Ginnie Mae owns and services the delinquent loans, allowing it to collect a fee (based on the 10-year Treasury) from the Federal Housing Administration (FHA).
In 2009, the bankruptcies of Taylor Bean & Whitaker, Ocala, Fla., and LendAmerica, Melville, N.Y., left Ginnie Mae holding the servicing rights on $26 billion of government-guaranteed loans.
"We are going to earn 3% to 3.5% on the mortgages," Tozer said.
Ginnie will receive a claim check from FHA if the loans go through the foreclosure process. "This action will save Ginnie Mae approximately $95 million a year," according to the agency's annual report.