Ginnie Mae plans to introduce a new class of hybrid adjustable-rate mortgages to give investors access to longer pools of mortgage-backed securities. The agency will offer three-, five-, seven- and 10-year hybrid ARMs, starting next month, according to
Theodore Foster, v.p. in MBS. Foster told
BW at the
Mortgage Bankers Association's conference in Washington, D.C. last week that new hybrid ARMs will meet investor demand for government ARM products that offer more than just a one-year maturity, which is currently the only kind Ginnie Mae sells. The longer paper appeals to a wider investor base, Foster said.
Fannie Mae and
Freddie Mac already sell longer ARMs; in this pooling, Ginnie Mae would bring together
Veterans Administration and
Federal Housing Administration loans on similar terms as those offered by private mortgage originators.
Ginnie Mae is also introducing interest-only and principal-only investments for interest rate-sensitive investors. Foster predicted that, among other buyers, mortgage banks and insurance companies will be interested in these hedging instruments as rates appear to be headed higher. Foster explained that these are better risk management and yield enhancement tools for investors.
Investors seem ready to welcome the new products. ARMs are bound to be in demand in a rising-rate environment, said Micheal Cheah, who runs a $1.5 billion Ginnie Mae fund at AIG SunAmerica Asset Management.
