New pool type will allows borrowers to make lower monthly payments but can still be sold on the secondary market in a security
Ginnie Mae is set to introduce a new 40-year mortgage term for its issuers on the heels of administrative shake ups at the top of the housing industry.
Only modified loans with terms greater than 361 months and less than or equal to 480 months will be accepted, but there will be no loan amount restriction, Ginnie Mae said. The mortgage-bond giant said it expects the new pool to be available in October.
The pool must also be authorized by the Federal Housing Agency and other agencies whose programs are the basis for loans through Ginnie Mae, said Michael Drayne, Ginnie Mae acting executive vice president, in a press release.
“We have begun the work to make this security product available, because an extended term up to 40 years can be a powerful tool in reducing monthly payment obligations with the goal of home retention,” Drayne said. “It’s important that Ginnie Mae issuers have secondary market liquidity for options that our agency partners determine are appropriate for supporting homeowners in distress.”
John Getchis, Ginnie Mae’s senior vice president for capital markets, noted that the 40-year pool design gives issuers more control and the ability to maximize market pricing.
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