Ginnie Mae president Kevin Chavers is walking a fine line between the Mortgage Bankers Association and Wall Street on a proposal to change the way some of the agency's securities are structured.

In his first public comment on the MBA's push to make more of the securities easier to trade by categorizing them as Ginnie Mae I securities, Mr. Chavers told American Banker he would "prefer to look at ways to enhance the program without changes that could raise liquidity questions."

The loans are now classified as Ginnie Mae II securities, which require higher yields, and thus higher interest rates to borrowers.

The MBA has reasoned, in a proposal it began formulating last year, that the change would reduce costs to borrowers. The PSA Bond Market Trade Association, which represents mortgage security traders and underwriters, said such a shift could lead to confusion in the $500 billion Ginnie Mae market.

MBA executives did not sound too disappointed by Mr. Chavers' comments. The proposal "remains alive but is in flux right now," said Phyllis Slesinger, MBA staff vice president handling the matter.

Indeed, Mr. Chavers agreed that there is room for improvement. "We'll look at ways we can make changes in Ginnie Mae II's," probably by making information about the securities more frequently available, he said.

Some investors agree with the PSA, saying changes would hamper the way the securities are now traded.

"This would sort of muddy the waters on what is right now a clearly identified Ginnie Mae I market," said Paul Geyer, portfolio manager at Chubb Corp., Warren, N.J.

But other investors said the market would be able to digest the change and that it would be beneficial for lenders.

"This could make things easier for mortgage bankers" to make Ginnie Mae loans, said Jack Bernard, principal at RCM Capital Management, a money manager in San Francisco. "There would be more lending, and the market would become more homogeneous and more liquid."

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