bryanmcnee
Moderator
Registered: 07/31/08
Posts: 15
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Reply with quote | #1 |
Hi Bryan,
Why is there such a huge price difference between GNMA and the FNMA securities on the investors rate sheets?
I look forward to your response...Thanks
Geoffrey Bolen
Your Mortgage Advisor For Life
Primary Residential Mortgage, Inc.
8121 Georgia Avenue, Suite 600
Silver Spring, MD 20910
Phone: 301-588-4701 x84
Fax: 301-588-4709
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bryanmcnee
Moderator
Registered: 07/31/08
Posts: 15
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Reply with quote | #2 |
FNMA and GNMA bonds trade differently than each other for two very important reasons:
On the plus side GNMA I and GNMA II pools are backed by the US Government. FNMA is NOT backed by the US Government. So, investors may decide to purchase GNMA instead of FNMA if they want some measure of safety but don't wan the super safe- but low yields of TBills.
On the negative side GNMA loans have higher LTVs, higher debt ratios, lower average credit scores and much higher delinquency rates which affect your servicing revenue.
Depending on market conditions traders will give one of the two listed attributes more weight in their decision
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