Review of Ginnie Mae Jumbo Collateral

February24,2011
MarketQuantitativeAnalysis
Review of Ginnie Mae Jumbo Collateral
MikhailTeytel
2128168465
mikhail.teytel@citi.com
SandraVedadi
2128160949
sandra.vedadi@citi.com
DavidCohen
2128160503
david1.cohen@citi.com
Ginnie Mae jumbo or M JM issuance has risen at the end of

2010,reaching$600Mpermonth.
Prepayments of Ginnie Mae jumbo pools are much faster than
prepayments of the conforming Ginnies, and over the past two
years frequently stayed in the 50%70% CPR range. Refinancings
are the greatest cause of fast speeds, although defaults may
contributeaswell.
AlthoughjumboGinnieborrowersaretypicallymoreaffluentthan
conforming Ginnie borrowers, Ginnie jumbo default experience is
comparable to that of conforming Ginnies. Variations in credit
between Ginnie jumbo pools are frequently more important for
defaultsthanhigherloansize.
A reduction in the FHA conforming limit may lower Ginnie jumbo
speeds by 20%30%. This together with the recently announced
increase in the annual MIP may significantly improve Ginnie Mae
jumboconvexity.
Aftertheburstofthehousingbubblein2008,thesupplyofcredittoprivatelabeljumboloansdriedup.
Toaddressthisproblem,thegovernmentincreasedFHAloanlimits.Inordertosecuritizehighbalance
FHAloans,GinnieMaeexpandedtheGinnieMaeIIprogramtointroduceanewnonTBAeligiblepool
type M JM the focus of this article. Throughout this article, we will refer to the Ginnie II M JM
collateral as Ginnie Mae jumbos, and will review legislation governing their issuance as well as their
productionvolumes,collateralcharacteristics,anddelinquencyandprepaymentpatterns.Wewillalso
compareGinniejumbostoconventionalagencyjumbosandtraditionalconformingGinnieIIcollateral.
Finally, we will discuss the impact of the recent Ginnie Mae underwriting changes and of a possible
reduction in the FHA loan limit on Ginnie jumbo speeds. For our analysis, we will consider 30year
collateral,whichconstitutesthebulkoftheissuance.
Legislation Governing FHA Jumbo Production

Composition of M JM Ginnie pools is affected by the loan limits of FHA, VA, and other government
loan guaranty programs, as well as Ginnie Mae TBA eligibility rules. The TBA eligibility rules are
important because jumbo collateral generally trades at a discount to TBAs and originators would,
wheneverpermitted,placecheaperjumboloansintohigherpricedTBAeligiblepools.Onlyjumboloans
thatcouldnot,foronereasonoranother,beplacedintoTBAeligiblepoolswouldendupinMJMpools.
ChangesinFHAloanlimit
Traditionally,theFHAloanlimithasbeensetatabout87%oftheconforminglimit.However,aseriesof
enactmentschangedthisrule(seeFigure1).ThestartingpointwastheEconomicStimulusActof2008
(ESA) which temporarily increased the FHA loan limit depending on the Metropolitan Statistical Area
(MSA). Subsequently, the Housing and Economic Recovery Act of 2008 (HERA) established permanent
MSAspecificloanlimitswhichwerelowerthantheESAlimits.However,inthebeginningof2009,these
limitswererestoredtotheirESA2008levelsbytheAmericanRecoveryandReinvestmentAct(ARRA).
ThiscommentaryhasbeenpreparedbyMarketsQuantitativeAnalysis("MQA"),whichispartofCitigroupGlobal
Markets'salesandtradingoperations.
ReviewofGinnieMaeJumboCollateral
February24,2011
Figure 1. Impact of Enactments on FHA loan limits since 2008
Economic Stimulus Act (ESA) of

2008
Enactment
Date
FHA
maximum
loan size
FHA Loan
Origination
Date
Housing and Economic Recovery

Act (HERA) of 2008
February 13, 2008
July 30, 2008
American Recovery and

Reinvestment Act (ARRA) of
2009
February 17, 2009
125% of the median house price in

the geographic area, but floored at
$271,050 and capped at $729,7501
115% of the median house price in

that geographic area, but floored at
$271,050 and capped at $625,500
ESA limits
On or Before December 31, 2008 but

loan endorsed after March 6,2008
On or After January 1, 2009
January 1, 2009 through

December 31, 2009 (later
extended to September 30, 2011)
Source: HUD (Morgage Letter 08-06, 08-36, 09-07, 09-50, 10-40) and Citi.
ChangesinVAguaranty
UnliketheFHA,theVAdoesnotguaranteetheentireprincipaloftheloan.Instead,theVAguarantees
only a fraction of the loan up to a maximum amount called the VA entitlement. Traditionally, the
entitlement was countyspecific, but generally limited to 25% of the conforming limit, which allowed
lenderstooriginateconformingVAloanswithnodownpayment.Theoretically,therewasneveralimit
tothesizeofaVAloan.Anonconformingloanwouldrequireadownpaymentthattogetherwiththe
VA entitlement would constitute 25% of the home value. For example, in the first half of 2008, the
maximumguarantyofferedbyVAwaslimitedto25%oftheconformingloanlimitof$417K,orabout
$104K.Ifaveteranwantedtobuya$500,000home,alenderwouldtypicallyrequireabout$21,000in
downpayment.
The dollar amount of VA entitlements has increased in step with increases in the conforming limit.
Moreoverinsomehighcostcounties,theVAentitlementwasraisedabove25%oftheconforminglimit.
ChangesinGinnieMaeTBApoolingRequirements
Traditionally,GinnieMaerestrictedthesizeofloansallowedtobeplacedintoaTBAeligiblepool,with
thecutoffatabout87%oftheconforminglimit.However,inSeptember2007,thelimitonthesizeofVA
loanswaslifted,andVAloansofanysizewereallowedintoTBAeligiblepools.AfterthelimitonFHA
loansizewasraisedin2009,GinnieMaeallowedloansexceedingacertainthreshold,calledthehigh
balanceloanlimit,tobeplacedintoTBAeligiblepools,albeitsubjecttothe10%deminimusrule.Atthe
sametime,theVAexceptionwasterminated,placingVAloansunderthesame10%deminimusrule.
RecentchangestotheGinnieMaeTBApoolingrequirementsaredelineatedinFigure2.
Higherlimitsapplyto24unitpropertiesorpropertieslocatedin AK, GU, HI and VI.
ThiscommentaryhasbeenpreparedbyMarketsQuantitativeAnalysis ("MQA"),
whichispartofCitigroupGlobalMarkets'salesandtradingoperations.
2
February24,2011
Figure 2. GNMA TBA Eligibility for 1-Unit Property
September 1 2007
Loan Origination Date
April 1, 2008
January 1, 2009
Before October 1,2008
On or After October 1, 2008
High-Balance Loan Limit

for 1-Unit Properties2
$362,790
TBA Eligibility Rule
High Balance Loans are not allowed (see VA exception

below)
Exception for VA loans
VA loans are allowed in TBA-eligible pools without any

loan size restriction.
$417,000
High-Balance loans may be pooled into
TBA-eligible pools subject to the 10%
de minimus rule
High-Balance VA loans may be pooled
into TBA-eligible pools subject to the
10% de minimus rule
Source: Ginnie Mae (APM 08-05, 08-06, 08-25, 09-07) and Citi.
Issuance
IssuanceofGinnieMaejumbocollateralisshownFigure3.AftertheESAActof2008,jumboissuance
startedtorise,reachingalmost$2billionpermonthbythesummerof2008.Atthatpoint,theshareof
jumbo issuance reached 18% of the total Ginnie II 30 year issuance. However, since the beginning of
2009,theissuanceofMJMdroppedforavarietyofreasons,includingthereductionoftheFHAloan
limit by HERA, ability, albeit limited, to securitize jumbo loans into TBAeligible pools, and the
introduction of competing conventional products (agency jumbos). As seen in Figure 4, issuance of
FannieMaeJumbopools(designatedbytheprefixCK)increasedrelativetoissuanceofGinniejumbos.
Attheendof2010,lowermortgageratesdroveMJMmonthlyissuancetoabove$600MM.Thebulk
ofrecentjumboissuancehasbeenin4sand4.5s.
Higherlimitsapplyto24unitpropertiesorpropertieslocatedin AK, GU, HI and VI.
3
February24,2011
Figure 3.GN II Jumbo Issuance and the Ratio of GN II Jumbo

Issuance to GN II Conforming 30-Yr Issuance
Figure 4. Fannie Mae and Ginnie Mae Jumbos Issuance
Source: CPRCDR and Citi.

Collateral Characteristics
Figure5andFigure6comparecollateralcharacteristicsofjumboandconformingGinnieIIs.Asexpected
jumbocollateralpoolshavelargerloansizes(2.5timesbigger)thantraditionalGinnieIIs(seeFigure5).
Jumbo2008collateralhasasomewhatlowerloansizethan2009and2010,whichmaybeduetothe
changeintheloansizelimit.
When compared to GN II 30 Yrs, jumbos have somewhat lower original LTVs and higher FICO scores,
suggestingsomewhatbettercreditperhapstheresultofjumboborrowersbeingmoreaffluent.The
data shows that 2008 jumbo loans have somewhat poorer credit scores than 2009 and 2010 loans.
However,theFICOsamplesizeisrathersmallforpoolsoriginatedin2008.
Figure6showsthatjumbopools,especiallythoseoriginatedin2009and2010,wheninterestrateswere
low,haveasignificantlylargerfractionofrefinanceloanscomparedtoGNII,whichisaconsequenceof
theirhigherrefinancingincentive.
Onaverage,jumbopoolshaveahighershareofFHAloansthanVAloans,whichisconsistentwiththe
composition of conforming Ginnies. However, for lower coupons, the FHA share is lower for jumbos
than for conforming Ginnies, and for higher coupons its higher. Another interesting observation is
thatjumbocollateraloriginatedin2008hasveryfewVAloans.Recallthatin2008,VAloanscouldbe
placedintoconformingTBApoolswithoutloansizerestrictions.
4
February24,2011
Figure 5. Current Balance, Current Loan Size, Credit Score and OLTV of Ginnie Jumbos and Ginnie II 30 year Collateral, January 2011
Coupon
3.5
4.0
4.0
4.5
4.5
5.0
5.0
5.0
5.5
5.5
5.5
6.0
6.0
6.5
7.0
Year
2010
2009
2010
2009
2010
2008
2009
2010
2008
2009
2010
2008
2009
2008
2008
CBal($MM)
Jumbos
GNII
24
1,260
103
2,406
1,727
35,161
424
48,338
1,680
77,829
206
3,661
614
64,976
774
57,186
745
17,449
271
7,107
21
2,245
332
8,258
35
846
191
4,475
34
385
Cloansize(K)
Jumbos
GNII
503
494
541
483
528
428
493
516
431
480
459
434
407
424
429
195
190
198
185
185
167
166
162
152
137
118
130
111
114
94
FICO
OLTV
Jumbos
GNII
Jumbos
GNII
757
720
92
689
665
90
740
719
92
664
681
94
731
710
93
673
661
93
714
647
93
723
690
93
632
651
93
694
629
91
698
644
92
603
635
92
608
602
93
615
612
92
635
589
89
96
95
95
95
95
95
95
94
94
94
94
94
94
93
93
Source: Citi, CPRCDR
Figure 6. Loan Purpose and Loan Type, January 2011
Coupon
3.5
4.0
4.0
4.5
4.5
5.0
5.0
5.0
5.5
5.5
5.5
6.0
6.0
6.5
7.0
Year
2010
2009
2010
2009
2010
2008
2009
2010
2008
2009
2010
2008
2009
2008
2008
CBal($MM)
%REFI
Jumbos GNII
Jumbos GNII
24
1,260
51.7
17.6
103
2,406
52.4
21.0
1,727 35,161
53.7
36.6
424 48,338
49.9
37.0
1,680 77,829
50.1
29.7
206
3,661
20.0
21.6
614 64,976
42.7
31.4
774 57,186
37.7
28.8
745 17,449
27.4
30.1
271
7,107
45.5
28.6
21
2,245
53.1
36.5
332
8,258
31.7
30.5
35
846
38.7
22.4
191
4,475
43.9
33.6
34
385
53.5
36.1
%Purchase
Jumbos GNII
31.7
53.1
29.6
43.5
31.1
46.4
35.3
45.2
39.5
54.8
36.0
30.5
46.4
51.6
53.3
58.1
50.8
40.2
43.8
56.8
42.3
49.5
53.3
44.6
48.5
55.0
48.2
48.1
39.9
50.1
%FHA
Jumbos GNII
44.0
61.5
58.0
70.7
78.3
70.0
60.5
74.5
70.5
76.2
99.5
69.7
81.7
81.5
74.6
83.6
99.2
80.7
91.1
85.8
88.0
88.4
99.9
84.6
90.8
88.9
100.0
87.6
100.0
95.2
%VA
Jumbos GNII
56.1
34.4
42.0
26.2
21.5
26.1
38.6
21.3
29.5
19.9
0.5
27.5
17.3
13.3
25.2
12.6
0.6
15.6
8.0
11.3
12.0
10.1
0.2
9.6
9.2
7.7
0.0
6.4
0.0
3.4
Geographical Distribution
Figure 7 shows the geographic distribution for jumbo collateral. Since FHA and VA loan limits are not
uniform across the country, the geographic distribution of Ginnie jumbos is different from that of
conforming Ginnies. Jumbo collateral has a larger share in more expensive states, with California and
New York accounting for more than 50 % of the jumbo issuance. While differences in geographic
compositionmostlikelyhaveaneffectonjumboprepayments,jumbospeedsaretypicallyfasterthan
thoseofconformingGinniesforallstates,suggestingthatgeographyisnotthemostimportantdriverof
fastjumbospeeds.
5
February24,2011
Figure 7. Geographical Distribution of Ginnie Mae Jumbo Collateral as of December 2010
State
CA
VA
NY
MD
NJ
WA
MA
DC
CT
FL
PR
HI
CO
US
%Distribution
Jumbo
37.1%
14.0%
14.0%
9.4%
6.3%
3.7%
2.4%
1.6%
1.4%
1.4%
1.2%
1.2%
1.0%
100.0%
GNII
10.2%
4.6%
3.4%
3.0%
2.8%
3.2%
1.5%
0.3%
1.0%
5.2%
0.0%
0.4%
3.4%
100.0%
CPR1yrfor20086s
Jumbo
GNII
38.3
21.9
25.5
16
17.2
9.5
29.5
21.3
32.3
17.1
39.6
19.5
39.4
26.1
18.1
19.8
29.7
14.8
17.6
9.6
4.6
0
36.8
19
46.4
18.6
32.9
15.8
Servicers
Theservicerdistributionforjumboschangedsomewhatbetween2008and2009(seeFigure8).In2008
therewasalargeconcentrationintwoservicers:ChaseandWellsFargo(about45%),butin2009and
2010 the share of these two servicers declined as they shifted some of their jumbo production to
conventionalsandTBAeligibleGinnies.
Figure 8. Servicer Distribution of Ginnie Mae and Fannie Mae Jumbo Collateral (Fannie as of January 2011, Ginnie as of December
2010)
%perServicerin2008
GN
GNII
Jumbo
30
CHASE
24.2
15.6
BOACW
21.3
24.6
WFHM
20.7
19.0
CITI
10.0
6.5
GMAC
3.8
4.1
TBW
2.7
5.9
FLAG
2.3
3.9
METLIFE
1.7
0.5
SUN
1.6
2.6
PHH
1.3
2.0
BBT
1.2
1.6
USB
1.1
1.7
FT
1.0
0.4
PNC
0.9
2.7
MTB
0.7
0.0
HSBC
0.5
0.2
Source:Citi,CPRCDR
FN
Jumbo
12.5
17.1
21.9
12.6
2.7
0.8
2.9
3.3
0.8
0.2
0.9
%perServicerin2009
GN
GNII
FN
Jumbo
30
Jumbo
BOACW
16.9
31.3
17.0
CITI
13.1
2.5
4.9
NAVY
13.1
0.2
CHASE
6.6
9.0
11.5
PHH
5.9
2.4
1.4
GMAC
5.7
5.9
4.3
FLAG
5.4
2.0
0.5
METLIFE
5.3
2.6
10.6
WFHM
4.7
25.8
32.6
FRDOM
3.2
0.6
BBT
2.5
0.9
2.4
MTB
2.2
0.1
HSB
1.2
DORAL
1.0
HSBC
0.7
0.0
3.4
PNC
0.7
1.5
0.0
6
%perServicerin2010
GN
GNII
FN
Jumbo
30
Jumbo
UNRPT
20.9
13.5
5.1
BOACW
19.8
23.7
19.6
CHASE
10.9
7.8
10.7
WFHM
6.7
30.1
30.4
GMAC
6.5
3.9
6.0
NAVY
6.1
0.0
0.2
METLIFE
5.7
1.2
2.0
CITI
4.2
1.3
6.0
PHH
3.1
3.1
2.3
FLAG
2.8
1.1
1.2
FRDOM
1.9
0.6
SUN
1.6
1.1
1.4
MTB
0.7
0.0
QUICK
0.6
0.0
0.7
HSBC
0.6
1.1
BBT
0.5
0.9
0.0
February24,2011
Delinquencies
Figure9comparesjumboandconformingGinnie60daydelinquenciesfor6sof2008and5sof2009.36s
of 2008 had lower delinquencies than conforming Ginnies until the middle of 2009, after which the
trend reversed. For 5s of 2009, jumbo and conventional delinquencies were similar, perhaps with
somewhatlowerlevelforjumbos.Asimilarpatternisobservedforothercohorts:for2008production,
jumbodefaultsarehigherthanconformingGinnies,andfor2009and2010collateral,defaultratesare
similar,atleastsofar.
Figure 9. 60-Day Delinquency for 2008 6s (left) and 2009 5s (right)
GinnieMaeservicershaveanoptiontorepurchase90daydelinquentloansatparoutofGNMApools,
and buyouts can contribute significantly to overall speeds. Figure 10 compares buyouts, measured in
constant buyout rate (CBR%), for jumbo and conforming Ginnie collateral. For 6s of 2008, jumbo
buyouts are considerably faster because of higher delinquencies. Are jumbo Ginnies bought out more
efficiently by servicers than conforming Ginnies? Figure 11 shows ratios of buyouts to 90day
delinquencies.Whilebuyoutefficiencyissimilarfor2008cohorts,itislowerfor2009collateral.
Figure 10. 1-Month CBR for 2008 6s (left) and 2009 5s (right)
10
50
1-Month CBR (%)
40
Jumbo
1-Month CBR (%)
45
GN II 30 Yr
35
30
25
20
15
10
Jumbo
7
6
5
4
3
2
A pr-08 A ug-08 Dec-08 A pr-09 A ug-09 Dec-09 A pr-10 A ug-10 Dec-10
GN II 30 Yr
Feb-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Wehavechosenthe60daydelinquenciesbecausetheyareindicativeofcollateralperformance,while90day
delinquenciesareaffectedbyservicerbuyouts.
7
February24,2011
Figure 11. Ratio of 1-Month CBR to % 90D for 2008 6s (left) and 2009 5s(right)
OverallwebelievethatGinniejumbodefaultexperienceisgenerallyinlinewiththatofconforming
Ginnies.Allelsebeingequal,higherloansizemostlikelyleadstohigherdefaults.However,allelseis
rarelyequal.Thecreditqualityofjumbopools,includingFICOandcurrentLTV,varyfromvintageto
vintageandfrequentlyfrompooltopool,andvariationsincreditqualityaregenerallymoreimportant
determinantsofdefaultsthanloansize.Eachpoolshouldbeanalyzedonitsownmerits.
Prepayments
Overthepasttwoyears,Ginniejumboprepaymentswereveryfast,frequentlyinthe50%70%CPR
range(seeFigure12).
Figure 12. 1-Month CPR for 2008 6s (left) and 2009 5s (right)
Fastinthemoneyspeedsforjumbosareexpectedandarelikelytocontinueinthefuture.GinnieMaes
arenoexception.Fastjumbospeedsarecausedbyverylargedollarincentivesadirectconsequenceof
highloansize.ForGinnieloans,whichhaveapopularstreamlinedrefinancingprogram,refinancinganin
the money jumbo loan may be very attractive. Many Ginnie borrowers choose a nopoint nocost
refinancing,whereallrefinancingcostsareconvertedintoahighermortgagerate.WhenajumboGinnie
borrowerissufficientlyinthemoneytolowertheirratethroughanopointnocostrefi,prepayments
8
February24,2011
shouldbefast,andthey were.RecenttighteningoftheFHAsstreamlinedrefinancingrulesmayhave
moderatedspeedsslightly(seetheJanuary2010dropinspeedsof6sof2008inFigure12),butspeeds
remainedveryfast.
Comparison to Conventional Jumbos

InFigure13,wecomparetheprepaymentScurvesofconventionalagencyjumbos,GinnieMaejumbos
andconformingGinnieIIs.TheScurvesforconventionalandGinnieMaejumbosaresteeperthanfor
conforming Ginnies a consequence of jumbos higher sensitivity to mortgage rates. Amongst the
jumbos,theconventionalScurveissteeperthantheoneforGinniesmostlikelyresultingfromhigher
loansizesandbettercreditforconventionaljumboborrowers.
Figure 13. Conventional Agency Jumbo, Ginnie Mae Jumbo and Conforming Ginnie II Prepayment S-Curves for 2008 and 2009 Origination, Apr
2008 to January 2011
GN Jumbo
GN II
FN Jumbo
GN II
70
60
FN Jumbo
60
50
1 month CPR(%)
40
30
20
10
40
30
20
10
0
-100
2009 Origination Year
70
50
1 month CPR(%)
GN Jumbo
2008 Origination Year
0
Incentive (bp)
0
100
200
-100
0
Incentive(bp)
100
200
Source: CPRCDR
InFigure14,wetakealookatthecollateralcharacteristicsofGinnieMaeandFannieMaejumbosasof
January2011.Theloansizeishigherforconventionaljumbosby$50K$100K.Conventionaljumbosalso
have better credit than Ginnie jumbos: current LTVs are 20%30% lower and FICOs are often 50100
pointshigher.
9
February24,2011
Figure 14 Current Balance, Current Loan Size, Credit Score* and OLTV of Ginnie Jumbos and Fannie Jumbos Collateral
Coupon
3.5
4
4
4.5
4.5
5
5
5
5.5
5.5
5.5
6
6
6.5
6.5
7
Year
2010
2009
2010
2009
2010
2008
2009
2010
2008
2009
2010
2008
2009
2008
2009
2008
CBal ($ MM)
GN
FN
Jumbo
Jumbo
24
255
103
384
1,727 12,798
424
6,384
1,680 13,918
206
449
658
4,296
774
4,311
837
1,142
271
241
21
58
1,011
935
38
38
305
190
17
2
34
16
Cloan size (k)

GN
FN
Jumbo
Jumbo
503
577
494
527
541
581
483
551
528
578
428
578
492
549
516
571
431
550
480
545
459
564
424
549
400
549
422
553
461
637
429
555
CLTV
GN
FN
Jumbo
Jumbo
92
67
91
60
92
66
94
64
92
66
101
73
93
70
91
70
101
77
93
73
91
77
98
81
96
77
97
82
94
81
93
83
FICO
GN
FN
Jumbo
Jumbo
757
775
689
772
740
772
664
767
731
768
673
761
714
761
723
759
636
757
694
747
698
741
611
750
608
721
619
737
751
635
712
1 Month CPR (%)

GN
FN
Jumbo
Jumbo
0
4.2
0.1
13.5
1.5
5.7
14.7
30.4
4.5
22.1
36.8
61.7
27.4
38.5
24.2
35.7
39.1
58.2
32.4
34.8
61.7
9
47.5
54.4
20.5
45.9
46.6
47.1
49.4
0
26.2
61
Recent Underwriting Changes May Improve Ginnie Jumbo Convexity

RecentchangestotheGinnieMaeunderwritingguidelineswilllikelyimpactallGinnieMaecollateral,
includingGinnieMaejumbos.Inparticular,a25bpincreaseintheannualinsurancepremium,will
reducerefinancingincentiveby25bp,whichaccordingtoFigure13,mayresultinslowerspeedsby
about5%10%CPR.
ApossiblereductionintheGinnieMaeconforminglimitmayfurtherdampedjumbospeeds.Inarecent
whitepaper,4theTreasuryalludesthattheincreaseintheconforminglimitduetoARRAmayexpirein
September2011.GinnieMaejumboborrowers,whoseaverageLTVisabove90%,willtypicallynotbe
abletorefinanceintononagencyloans,andthereforeborrowerswithaloansizeabovethenew
conforminglimitmaynotbeabletorefinanceatall.
WeestimatethatifconforminglimitsreverttotheHERAslevel,jumbovoluntaryspeedsmaydeclineby
20%30%,althoughalargerdropispossible.Theuncertaintyinourestimateisduetothefactthatthe
FHAconforminglimitsaredeterminedontheMSAlevelandtheexactpercentageofloansthatwould
becomenonconformingishardtoestimate.Figure15showsthatroughly20%ofGinnieMaejumbo
loanswillexceedthemaximumconforminglimitunderHERA($625K).Weestimatethatperhaps
another10%ofjumbocollateral,whileunderthemaximumconforminglimit,willexceedthe
conforminglimitfortheirMSA,andthereforewillnotqualifyforanotherFHAloan.
Thisanalysissuggeststhatthereductionintheconforminglimitmayreducepeakinthemoneyjumbo
speedsfromabout60%CPRtoabout45%.Thiswouldleadtoaconsiderableimprovementinthe
convexityofjumboloans.However,sincethedetailsofthetransitionhavenotbeenreleased,risks
remain.Forexample,itispossiblethatafterARRAexpires,legacyjumboloanscouldstillbeconsidered
conforming.
4
ReformingAmericasHousingFinanceMarket.AReporttoCongress,February2011
10
February24,2011
Figure 15 Average loan size quartiles for Ginnie Mae Jumbo Pools, $ in Thousand.
Min
Q2
181
Q3
457
Q4
517
11
Max
608
874
February24,2011
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Review of Ginnie Mae Jumbo Collateral

Ginnie Mae jumbo or M JM issuance has risen at the end of

Legislation Governing FHA Jumbo Production

Figure 1. Impact of Enactments on FHA loan limits since 2008

Economic Stimulus Act (ESA) of

Housing and Economic Recovery

February 13, 2008

July 30, 2008

American Recovery and

125% of the median house price in

115% of the median house price in

On or Before December 31, 2008 but

On or After January 1, 2009

January 1, 2009 through

Higherlimitsapplyto24unitpropertiesorpropertieslocatedin AK, GU, HI and VI.

Figure 2. GNMA TBA Eligibility for 1-Unit Property

Before October 1,2008

On or After October 1, 2008

High-Balance Loan Limit

TBA Eligibility Rule

High Balance Loans are not allowed (see VA exception

Exception for VA loans

VA loans are allowed in TBA-eligible pools without any

Higherlimitsapplyto24unitpropertiesorpropertieslocatedin AK, GU, HI and VI.

Figure 3.GN II Jumbo Issuance and the Ratio of GN II Jumbo

Figure 4. Fannie Mae and Ginnie Mae Jumbos Issuance

Source: CPRCDR and Citi.

Source: Citi, CPRCDR

Figure 6. Loan Purpose and Loan Type, January 2011

Source: Citi, CPRCDR

Figure 7. Geographical Distribution of Ginnie Mae Jumbo Collateral as of December 2010

Source: Citi, CPRCDR

Source: Citi, CPRCDR

1-Month CBR (%)

1-Month CBR (%)

A pr-08 A ug-08 Dec-08 A pr-09 A ug-09 Dec-09 A pr-10 A ug-10 Dec-10

Source: Citi, CPRCDR

Source: Citi, CPRCDR

Source: Citi, CPRCDR

Comparison to Conventional Jumbos

2009 Origination Year

2008 Origination Year

Cloan size (k)

1 Month CPR (%)

Source: CPRCDR and Citi.

Recent Underwriting Changes May Improve Ginnie Jumbo Convexity

Source: CPRCDR and Citi.

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