Ginnie Securitizing VA Hybrids

VA, Ginnie execs speak at MBA convention

November 20, 2003

By MortgageDaily.com staff

Ginnie, which says its purpose is to serve low-to moderate-income homebuyers, began securitizing hybrid ARMs guaranteed by the U.S. Department of Veterans Affairs (VA) as of Oct. 1, stated Anderson while attending the Mortgage Bankers Association of America 90th annual convention.

“We believe this program will address investor demand for a securitized hybrid ARM investment while allowing issuers to offer a new product benefiting as many as 40,000 families, especially first time homebuyers and the families of active veterans,” said the vice president.

The product not only benefits low-to moderate-income borrowers, said Anderson, it provides investors “with the consistency of a fixed-rate security along with interest rate protection.”

The initial rate on these ARMs must be fixed for three years and yearly adjustments can be made after that — a maximum of 1% per year and 5% over the life of the loan, according to VA home loan director Keith Pedigo. The hybrid ARM index is the weekly average yield of U.S. Treasury securities adjusted for a constant maturity of one year and the underwriting will be done at the note rate. The Ginnie Mae II program securitizes the 3-, 5-, 7- and 10-year hybrid ARMs, added Anderson. In 2004, Ginnie — a government-owned corporation — plans to securitize hybrid ARMs guaranteed by the Federal Housing Administration (FHA), the executive said. If initialized in the same adjustment period, VA and FHA ARMs will qualify to be pooled into the same security.

George Anderson and Keith Pedigo