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VA HOME LOAN LIMITS REMOVED BY GINNIE MAE --
Ginnie
Mae said effective September 1, it will no
longer limit the size
of VA loans to the maximum original loan amount
for
conforming loans, which is currently at
$417,000.
Story here...
http://today.reuters.com/news/
articleinvesting.aspx?type=bondsNews
&storyID=2007-08-30T191033Z_01
_N30546224_RTRIDST_0_USA-
MORTGAGES-GINNIEMAE.XML
Story below:
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Ginnie Mae removes loan limit on VA mortgages
NEW YORK, (Reuters) - Ginnie Mae, a government-owned corporation,
said on Thursday it is eliminating the restriction on the size of
mortgage loans guaranteed by the Department of Veterans Affairs (VA)
that can be pooled in mortgage-backed securities it guarantees.
In a press release, Ginnie Mae said effective September 1, it will not
longer limit the size of VA loans to the maximum original loan amount
for conforming loans, which is currently at $417,000.
"We expect this change will expand the availability of low-cost
financing and increase homeownership opportunities for America's
veterans, particularly in high-cost areas, by encouraging lenders to
make more VA loans," Michael J. Frenz, Executive Vice President of
Ginnie Mae, said in the release.
With limited availability of credit for so called "jumbo" loans of more
than $417,000, currently in the private market, Ginnie Mae's move should
draw a surprisingly large amount of interest from veterans, Alec
Crawford, head of MBS strategy at RBS Greenwich Capital in Greenwich,
Connecticut, said in commentary published Thursday.
Approximately 30 percent of the loans that back Ginnie Mae
mortgage-backed securities are guaranteed by the VA and this percentage
could increase, he said.
Ginnie Mae mortgage-backed securities have cheapened in price since the
news emerged due to expectations of increased supply and changing
characteristics on loans, he said.
Ginnie Mae said it will continue to require that the amount of cash down
payment, plus the amount of the VA guaranty, equal at least 25 percent
of the value of the home.
Ginnie Mae MBS comprise a small portion of the roughly $4.25 trillion
"agency" MBS market, which stood at about $413 billion at the end of the
first quarter 2007. At roughly $7 trillion in size, which includes the
subprime sector, the mortgage bond market is the world's largest,
dominated by Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac have "conforming" loan limits of $417,000.
Ginnie Mae mortgage-backed securities are the only mortgage bonds that
carry the full faith and credit guarantee of the U.S. government.
The primary mortgage market, where loans get originated, has changed
significantly over the past few months. A sharp rise in defaults in the
subprime mortgage market, which caters to borrowers with poor credit
histories, has caused lenders to tighten requirements, making it
difficult for those with weak credit to get a home loan.
Some market observers say even borrowers with an unblemished credit
history are having a more difficult time getting a loan.
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Larry Scott --
