Ginnie Mae seemed to waste no time in coming up with a more acceptable proposal last week, following a negative reaction from the dealer community to the government-sponsored enterprise's poorly received original proposal.

Last week, the agency proposed using its $7 billion of reserves to purchase Ginnie Mae mortgage-backed securities instead of Treasury securities. By focusing on Ginnie Mae II's, it could accomplish the same goal as Ginnie Mae's original proposal. Lehman Brothers said that by doing this, it could improve execution for loans that do not currently qualify for Ginnie Mae I's.

Morgan Stanley Dean Witter anticipates that this plan has a good chance of being approved, noting that Department of Housing and Urban Development Secretary Andrew Cuomo has hinted in the past that he believes Ginnie Mae already meets their current charter. Even so, Lehman says that Ginnie Mae's reserves are not large enough to have much of an impact unless they are allowed to build a leveraged portfolio.

For example, Lehman says that over $30 billion Ginnie Maes were issued in the first four months of this year alone. The GSE has also proposed to clear their mortgage-backed securities through the New York Fed rather than the MBS Clearing Corp. This change would smooth the road for non-mortgage investors. A roundtable discussion is planned for later this month on these new proposals.

Additionally, last week George Anderson, executive vice president of Ginnie Mae, said that the agency still plans to alter pooling requirements for its mortgage securitization program, despite some initial negative comments from the investment community. Anderson also said that Ginnie Mae is planning to sell mortgage-backed securities via the Federal Reserve.

Speaking at the MBA National Secondary Market Conference in San Diego, Calif., Anderson reaffirmed that GNMA will continue to offer investors a quality product through as many outlets as possible to be a viable player in the real estate finance industry.

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