GMAC Mortgage Corp. is giving borrowers a simpler way of investing their reserves.
The Elkins Park, Pa., company will contract with a brokerage to place escrow funds in mortgage-backed securities, collateralized tax-exempt bonds, and other investments that borrowers choose.
Until now, GMAC has had a less-defined investment strategy for its borrowers, who must keep escrow monies with the lender to comply with federal housing regulations.
The Securities and Exchange Commission gave its nod to GMAC's new arrangement in a no-action letter that became available this month. Specifically, SEC chief counsel Catherine McGuire said the mortgageoperation would not have to set up its own brokerage unit to serve as administrator of the arrangement.
Under the new system, an outside brokerage house will oversee an account that names GMAC's 1,000 commercial borrowers and what kind of investment they have selected for their reserves.
The broker will charge the borrowers according to the trades they make within the account. GMAC will not receive compensation from the broker.