The Woodstock revival may be an the rage among baby boomers lately, but the secondary mortgage market agencies aren't showing any signs of returning to last year's refi-driven summer of love as purchase volumes continue to drop. But while the bad vibes continue for Fannie Mae and Freddie Mac, some lenders have spotted a rainbow forming over at Ginnie Mae.

Ginnie's purchase volumes are up considerably over a year ago, mostly because of the last surge of low interest rate originations that continued through the first quarter. And although Mortgage Marketplace has projected Ginnie's purchase volume to drop by more than $6.6 billion in 1994, some lenders point out a variety of reasons, for showing more interest in Ginnie.

"Conventional loans are far more subject to refis," said Chris Bowen, chief financial officer at Resource Bancshares, of Charleston, S.C. "But the government market hasn't gotten any stronger, the conventional market has simply gotten weaker."

Bowen believes lenders in the government market are more interested in generating government loans, particularly because of an increased appetite for government servicing. Congress is also close to passing legislation that would raise the ceiling for FHA loans, which is likely to attract even more lenders to the Ginnie market, and, with HUD aggressively pressing its fairlending agenda in an attempt to open the market for more first time home buyers, Ginnie has the potential for even more business.

Many of those buyers have typically gone to lenders that originate B- and C-quality loans, then sell them to private-label securitizers. But with regulators pressing hard for fair lending, many of those home buyers may find themselves at Fannie and Freddie's door-step--and, considering HUD's agenda, Ginnie Mae will see its share as well.

But those visions for larger markets aren't likely to be realized this year. The projections for the mortgage market in 1994 have spiraled down from an anticipated $800 million year to as low as $650 million. Fannie Mae Chairman James Johnson projected in July that the market would drop to about $700 million, still one of the strongest years ever, but down substantially to the $1 trillion market of 1993. That expected drop has been especially evident in the GSEs' purchase activity (see Page 6).

"Our mix of government-to-conventional loans is way up versus last year," said Ron Simpson, Resources' director of secondary marketing, adding that the company has upped its government lending to between 65% and 70% of its production volume. "At one time last year we were running at about 60% conventional, now we're concentrating more on government."

Resource's concentration on government loans has increased substantially. Through June, it has produced nearly $1.5 billion in Ginnie Mae originations, topping its entire 1993 production by $116 million. GE Capital Mortgage, which sold $2.5 billion in originations to Ginnie in 1993, sold $3.5 billion in the first half of 1994 alone. Mortgage Marketplace projects GE will finish 1994 with more than $6.6 billion in originations, a 63% increase over last year.

The MMP projections are based on averaged Ginnie purchase volumes based on May and June.

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