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Ginnie Mae unveils 40-year mortgage term for issuers

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.

“We think the market will find value in securities backed by these loans, so we wanted to provide a pooling structure that would enable issuers to capture that value — thereby enhancing their ability to provide the strongest possible options to the homeowners while remaining respectful of investors’ capital,” he said.

The news comes on the heels of Julia Gordon’s nomination by President Joseph Biden as new commissioner of the FHA — an agency with loans backed by Ginnie Mae — and the Department of Housing and Urban Development, as well as Biden moving to remove former Federal Housing Finance Agency Director Mark Calabria. And David Uejio, acting director of the Consumer Finance Protection Bureau, was tapped as the new assistant secretary at HUD.

HUD Senior Advisor Alanna McCargo said finding solutions to help keep people in their homes has been a priority of HUD’s leadership team over the past 12 months.

“As interest rates rise, this 40-year feature will enable more payment reduction options to help homeowners,” McCargo said. “Ginnie Mae has been integral to the interagency actions to prevent foreclosure for homeowners experiencing financial hardship as a result of [the COVID-19 pandemic].”

Ginnie Mae announced its first guarantee of a mortgage-backed security backed by digital pools, or pools of loans that consist entirely of eNotes, in February.

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