WASHINGTON, D.C. – Today, Ginnie Mae announced the settlement of the first real estate mortgage investment conduit (REMIC) tranche indexed to the Secured Overnight Financing Rate (SOFR). The transaction is a step towards implementing alternatives to the widely used LIBOR floating rate index. This security is the culmination of a team effort between Amherst Pierpont and Ginnie Mae.
“This transaction with a SOFR-indexed tranche underscores the flexibility of the Ginnie Mae Multiclass program,” said John Getchis, Senior Vice President, Office of Capital Markets at Ginnie Mae. “This is an important milestone because it allows program participants to fulfill demand for an alternative index to LIBOR. We expect other SOFR-indexed structures to become more frequent in the future as the index becomes more widely adopted by institutional investors.”
“We are proud to have worked with Ginnie Mae to bring the first SOFR-indexed Ginnie Mae REMIC class,” said Kenneth Dinovo, Senior Managing Director, Head of Structured Products Trading at Amherst Pierpont Securities. “This is the first SOFR-indexed security backed by the full faith and credit of the United States and the first SOFR-indexed mortgage-backed security. Although we have seen more than $87 billion in SOFR-indexed debt issued by 22 institutions since last May, this significantly expands the set of SOFR investments.”
The SOFR-indexed security is a $40 million floating rate tranche, within a $265 million REMIC, backed by adjustable rate mortgages, or MBS pools. The interest rate formula includes a spread of 40 basis points over the SOFR floating rate index value. The transaction settlement date is April 30, 2019.
About Ginnie Mae
Ginnie Mae is a wholly owned government corporation that attracts global capital into the housing finance system to support homeownership for veterans and millions of homeowners throughout the country. Ginnie Mae mortgage-backed securities (MBS) programs directly support housing finance programs administered by the Federal Housing Administration, the Department of Veterans Affairs, the HUD Office of Public and Indian Housing and the Department of Agriculture Rural Housing Service. Ginnie Mae is the only MBS to carry the explicit full faith and credit of the United States government.
Ginnie Mae I MBS are modified pass-through mortgage-backed securities on which registered holders receive separate principal and interest payments on each of their certificates. Ginnie Mae I securities can include single family, multifamily, manufactured home and project construction loans.
Ginnie Mae II MBS are modified pass-through mortgage-backed securities for which registered holders receive an aggregate principal and interest payment from a central paying agent. An Issuer may participate in the Ginnie Mae II MBS either by issuing custom, single-Issuer pools or through participation in the issuance of multiple-Issuer pools, which combine loans with similar characteristics.