FHA Mortgage Guide

Ginnie Mae has announced that it will create a new security for FHA high-balance loans, the bigger FHA mortgages allowed this year under the Stimulus Package.

Why is this important?

If super jumbo mega-loans were placed in the same package as loans which met the old conforming loan limits, then the worry has been that investors would see such mortgage-backed securities as excessively-risky, thus requiring higher rates. The problem is that then rates for ALL loans – not just the new and bigger ones – would increase.

By packaging the loans in separate securities, investors will be able to buy (or not buy) such securities with interest levels which may be significantly different from mortgage-backed securities with smaller loans.

The release from Ginnie Mae is below.

Ginnie Mae To Securitize First FHA High-Balance Loans — New Ginnie Mae Security Supports Economic Stimulus Package

Washington, DC - The Government National Mortgage Association (Ginnie Mae) is announcing that pools backed by the Federal Housing Administration’s (FHA) temporary, high-balance loans will be ready for April 1, 2008 issuance. Ginnie Mae will create a new multiple-issuer security under the Ginnie Mae II Mortgage-Backed Securities Program to accommodate these loans.

“We believe it’s important that Ginnie Mae support the stimulus package and create a vehicle that will improve market liquidity as soon as possible,” said Thomas R. Weakland, Acting Vice President of Ginnie Mae. “This new security will enable more borrowers to qualify for safe, affordable FHA-insured loans, which is critically important as the mortgage industry continues to navigate the ongoing market upheaval.”

All single-family loans higher than FHA’s current loan limit of $362,790 will be eligible for inclusion in the new pools. For detailed information about the new loan thresholds, please see the Ginnie Mae APM at this link http://www.ginniemae.gov/apm/apm_pdf/08-05.pdf. Issuers can begin submitting pools on March 24, 2008 for the April 1, 2008 issuance.

“A government-insured mortgage, coupled with the safety and liquidity of a Ginnie Mae security will greatly benefit homeowners, lenders and investors,” Weakland continued.

The Economic Stimulus Act of 2008 allows FHA to insure higher balance loan through December 31, 2008.

Ginnie Mae is a wholly-owned government corporation within the U.S. Department of Housing and Urban Development. Ginnie Mae pioneered the mortgage-backed security (MBS), guaranteeing the very first security in 1970. A MBS enables a mortgage lender to aggregate and sell mortgage loans as a security to investors. Ginnie Mae securities carry the full faith and credit of the United States Government, which means that, even in difficult times, an investment in Ginnie Mae is one of the safest an investor can make.

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