GMAC-RFC will add Residential Asset Mortgage Product (RAMP) to its quiver of trusts next year, allowing RFC to offer a mixed-bag product on a deal-by-deal or, as Managing Director Terry Farley dubs it, a "rent-a-shelf" basis.
"It's designed to accommodate a very broad range of residential loan assets," Farley explained.
RFC sees RAMP as a complement to its four primary issue trusts.
"With RASC transaction or a RALI transaction, an investor would know how that transaction is going to perform because they understand the consistency of the product underlying those issuances," she said. "But with the RAMP transaction, we're saying, you got to look at the assets, because this is a story, and it will be different, probably one transaction to the next in terms of both speed and credit performance.'"
Though RFC was not expecting RAMP to be accessible until mid-first quarter, the company received a note from the Securities and Exchange Commission last week stating the commission chose not to review the shelf filing, effectively allowing RFC access to RAMP as early as the end of the week.
"It shows the SEC is pretty comfortable with us," Farley said.
Though RFC has already looked at specific portfolios and in-house products to issue through RAMP - and could theoretically issue in 1999 - the company still plans a first quarter debut.
Farley speculates RFC could issue as much as $3 billion in year 2000 out of the new trust.
One Deal At A Time
Currently, RFC accesses four residential trusts, with assets adhering to specific criteria. "We have basically had the philosophy over the last five or six years where we say we really need to keep our shelves very pure,'" Farley explained.
For the jumbo, A-quality first mortgage loans, RFC issues through Residential Funding Mortgage Securities I, and for similar A-quality, "kind of alternative-A product," RFC uses Residential Accredit Loans.
In terms of the ABS primary market, RFC regularly issues its subprime, B-class and C-class product out of Residential Asset Securities Corp (RASC). Out of Residential Funding Mortgage Securities II, RFC issues high loan-to-value loans and A-quality home-equity lines, both opened and closed ended.
"RAMP is anything that doesn't fit in any of the above," Farley said. "It's really kind of easier to define that way."
RFC segregates its product so that investors "know exactly what they're getting, and they can plan on both speed and credit performance and predict that, because the product on that shelf is very homogenous."
With this in mind, Farley explained, a primary intention of the RAMP security is to keep the other four classes pure.
"The integrity of that four shelves is very critical to our business," Farley said.
Portfolios issued through RAMP might include: seasoned 15-year loans, or negatively amortizing COFI adjustable-rate mortgages, or re-performing loans emerging from a state of deliquency.
As with all other aspects of the new trust, RAMP product credit performance will differ from transaction to transaction.
"It could be wonderfully performing, seasoned product, so one could expect terrific performance," Farley said. "Or it could be some of the higher risk, higher return type. The issuance off the RAMP shelf will really depend on what assets we have at any point in time, and this will give us more flexibility."