St Louis Home Loans: Growing Risk At Ginnie Mae

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St Louis Finance and Loan Modification News: Ginnie Mae Pools Raising Investor Concerns
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Barclays Capital notes that the amount of previously delinquent and now-cured mortgages in Ginnie Mae pools are raising investor concerns.

According to St Louis home loans experts, this move is largely due to the fact that there is a higher probability of redefaults and spotty performances from individual servicers.

Ginnie Mae does not buy or sell loans or

issue mortgage-backed securities.

It guarantees investors a timely payment of principal and interest on MBS backed by Federal Housing Administration and VA loans.

The BarCap analysts estimate that as much as 12 percent to 13 percent of new production Ginnie pools are backed by reperforming loans which means servicers worked with the borrower to turn the mortgage from delinquent to current either through a modification or some other form of loss mitigation.

Analysts added that 45 percent of these reperforming loans will redefault over the next two years, which would boost prepayments.

Who services those loans often determines the delinquency rates and is a clear sign of risk, according to Deutsche Bank analysts.

According to a recent report on Ginnie delinquencies, mortgages serviced by Countrywide who was since bought by Bank of America holds a 1.94 percent 90-day delinquency rate in the Ginnie Mae I program of pools.

That’s 63 basis points higher than for all other pools in the program.

Countrywide holds a 3.2 percent 60-day delinquency rate, nearly double the rest of the program.

"Countrywide serviced pools continued to exhibit high delinquency rates despite the heavy buyout activity at the end of last year," writes Steven Abrahams, the head of securitization analysis for Deutsche Bank.

Ginnie put in new policies and holds servicers to strict delinquency limits to mitigate the risk in its pools.

It recently increased the base net worth requirement for participants in its single-family mortgage loan program.

The minimum net worth will move from a $1 million base net worth requirement to $2.5 million in 2011.

The number of loans in 60-plus day delinquency or foreclosure must be less than 7.5 percent of the total number of loans from the issuer.

The rate limit on 90-plus day delinquent loans is 5 percent.

With Countrywide less than two percentage points from the 60-day delinquency limit, Deutsche Bank analysts is now urging investors to pay attention to who is servicing those loans.

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