Government National Mortgage Association is taking more steps to address the detrimental loan churning and high prepayment speeds in its securities, effective April 1, 2018.
The company imposed seasoning requirements in late 2017 for streamline refinance loans to address rapid prepayments, which were negatively impacting some of its securities.
In April, streamline and cash-out refinance loans will only be pooled if six monthly payments on the underlying loan have been made and the refinance occurs no earlier than 210 days after the first monthly payment is made on the initial loan. These loans will be pooled into Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools.
Any loans that do not meet these requirements will not be pooled into Ginnie Mae standard mortgage-backed securities pools.
To be eligible for Ginnie Mae pools, loans must meet requirements for a fully underwritten rate term refinance loan set forth by the federal housing program or benefits administrator.
Ginnie Mae will also actively monitor the pooling activity of issuers and increase the tracking and analysis of prepayment rates. The company is reviewing standards for the definition of premium rate loans, which are prohibited for delivery into Ginnie Mae standard MBS pools.