Ginnie Mae To Eliminate HMBS Flat Servicing Fee Margin

Ginnie Mae announced this week it will eliminate the flat-fee option for servicing for the HECM mortgage-backed securities (HMBS) program.

Under previous guidelines, issuers have had the option to choose from two servicing compensation methods including a monthly flat servicing fee or a basis point strip of the interest.

Under the new guidelines, which will go into effect on July 1, issuers will no longer have the flat-fee option; rather, they must choose the basis point strip with a minimum servicing fee margin of 36 basis points. This includes Ginnie Mae’s six basis point guarantee fee.

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The guidance states that the new spread between the note rate and the rate at which the HMBS participation accrues interest must be at least 0.36% (36 bps), but no more than 1.50% (150 bps), including the 6 bps for the Ginnie Mae Guaranty Fee.

While reverse mortgage volume was down 35% during 2010, HMBS issuance reached $10.791 billion, up 26.4% from 2009.

View the HMBS servicing fee changes.

Written by Elizabeth Ecker

 

 

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