Soldiers' and Sailors' Civil Relief Act

Under the Soldiers' and Sailors' Civil Relief Act, mortgage lenders are required to charge no more than 6 percent interest on mortgage loans to active duty military personnel. Ginnie Mae has traditionally reimbursed issuers for the interest shortfall only when the borrower was called to active duty in Bosnia, Kosovo or Southwest Asia, as well as Afghanistan or other areas within Operation Enduring Freedom.

In October 2002, Ginnie Mae began to expand the reimbursement policy under the act to include all active-duty military personnel. Effective retroactive to September 11, 2001, Ginnie Mae will reimburse issuers for mortgage interest in excess of 6 percent – regardless of where the national guardsperson or reservist is called to serve.

This expansion means a much smoother process for lenders. We estimate it will save our issuer community about $7.5 million this year in lost interest.

To learn more about reimbursement under the Soldiers' and Sailors' Civil Relief Act, click here.

Representations and Warranties

In October 2002, Ginnie Mae began accepting representations and warranties from issuers that are federally regulated institutions or subsidiaries of federally regulated institutions in lieu of some of the collateral documents required for final pool certification. Once an institution receives reps and warrants, this change retroactively applies to all outstanding pools.

While this policy change does not relieve issuers of the responsibility to provide collateral documents, it does provide lenders with greater flexibility, allowing them to run their business more efficiently.

Change in Servicing Fee

Ginnie Mae recently announced that it would reduce to 19 from 44 the minimum number of basis points that issuers of federally guaranteed mortgages must set aside for servicing, a move that we believe will cut the cost of federally insured mortgages and increase affordable housing opportunities. The changes to the program became effective July 1, 2003 and affect only the GNMA II MBS program and pools or loan packages of single-family loans.

To view the press release on this announcement, click here.

To view the APM, click here (PDF).

Change in Ginnie Mae Loan Repurchase Policy

In response to investor concerns, Ginnie Mae recently changed its repurchase policy with regard to delinquent loans. Previously, issuers could repurchase a loan when at least one missed payment remained uncured for four consecutive months. As of January, 2003, issuers may repurchase delinquent loans only when no payment has been made for three consecutive months. This change is effective for loans in pools with an issue date of
January 1, 2003 and thereafter.

The new policy should allow investors to better forecast prepayments and have greater certainty about Ginnie Mae security performance.

To view the APM, click here (PDF).