PHILADELPHIA - The Department of Housing and Urban Development gave details of its planned sale of mortgage insurance premium rights to lenders gathered here for a recent servicing conference.
The presentation was led by Robert Horner of R.D. Horner & Associates, Chicago, one of three consulting firms advising HUD on the sale of $240 million a year worth of premium rights. Ann Baird-Bridges, acting director of the single-family insurance operations division at HUD, also answered questions at last week's conference.
Mr. Horner said Ginnie Mae servicers would have an opportunity to buy the insurance premiums on their own pools and discontinue the forwarding of premiums to the Federal Housing Administration. The sale would also enable large servicers to use existing staff and systems for collections.
HUD is examining whether to let the rights serve as collateral for loans. The packaged premiums would function similarly to servicing portfolios, allowing lenders with servicing cost structures to analyze the securities the same way.
The packages would be of insurance premium rights on more than two million loans with an annual cash flow of $240 million and $50 billion in unpaid principal balance. The loans were all originated before 1983 and are Section 530 single-family mortgages. Most are 30-year, fixed-rate models.
About 15 potential buyers attended the second session at the conference sponsored by the Mortgage Bankers Association.
One Wall Street mortgage trader said that while it is too early to tell whether the insurance-premium securities would do well he had seen a great deal of interest at this early stage.
"In talking to people around here," he said, "I think it will be well bid."
An official announcement will be made by the FHA in early September. Structuring and seller due diligence will take place June 7 through Sept. 1. Bids are tentatively due Oct. 11 and will be closed Nov. 8.