In an interview with The Mortgage Marketplace, acting Ginnie Mae President Robert Kalish discussed details surrounding the highly anticipated Ginnie Mae Remics program. Interview excerpts follow.
MMP: There has been a demand from the secondary market and Public Securities Association for the issuance of a GNMA Remic for several years, but Ginnie Mae has typically avoided the issue. Considering Fannie Mae and Freddie Mac's explosive success in the Remics market, why has Ginnie Mae has been so noticeably reticent about them?
Kalish: Contrary to our resisting the Remic, President Clinton announced Feb. 17 in a document titled Vision of Change for America," which went along with his 1994 budget submission to Congress, that Ginnie Mae would initiate a Remic program beginning in FY 1994. We've been directed and authorized by the president to initiate a Remic program. Following that announcement, [HUD] Secretary [Henry] Cisneros indicated that Ginnie Mae would begin developing a program as soon as possible. The previous administration had concerns about Ginnie Mae's limited staff and limited ability to implement and manage a Remic program.
MMP: How many people are being hired to undertake the Remic program?
Kalish: The 1994 budget authorizes an additional four positions -- three directly related to Remics. The fourth is a contracting position. And, in my view, the person who fills that position will spend 90% of his or her time on the Remic program. So, in essence, we will be getting four new full-time equivalents.
MMP: When will you issue your first Remic?
Kalish: I certainly would hope we could commence with our first issue sometime during the first quarter of the fiscal year, which would be by Jan. 1 -- but it could be earlier.
The program is still under development and we're waiting for the necessary legislation to be enacted. That legislation is part of the 1993 budget reconciliation bill. [That legislation] will give Ginnie Mae some flexible authority with regard to the charging of fees for the Remic program, which we need.
MMP: Will there be a higher guaranty fee for a Remic than there would be for the regular Ginnie Mae?
Kalish: We have not decided whether the Remic fee will be an annual fee or a one-time, up-front fee similar to an FHA program. That's another program development that's still being considered and under study.
MMP: Will demand be great for the product?
Kalish: It's a product that will have tremendous attractiveness to investors, particularly conservative investors who lay great weight on the full faith and credit of the government. This is unique because it will be the only Remic on the street backed by an explicit guarantee by the United States. Fannie and Freddie have implicit guarantees. That difference will give us a competitive advantage that I think we'll be very attractive to a great base of new investors.
MMP: Will your yields be less to reflect the greater demands?
Kalish: Yes. Another reason for Ginnie Mae being involved is to reduce the mortgage rates to the FHA and VA home buyers. So we want to pass those savings through to the home buyers.