ARM Update

February 26, 2018

Yield spreads between new-issue hybrid ARMs and Treasuries held firm last week. Activity was primarily focused on the following:

Earlier this month, Ginnie Mae announced a plan to target certain lenders with expulsion from its primary bond program over VA loan churning.  According to the announcement, Ginnie Mae notified a small number of issuers that have prepayment speeds that are outliers compared to other participants in the Ginnie Mae multi-issuer mortgage-backed securities.

The Agency’s recent moves are part of a broader effort to curb rapid refinancing of loans in Ginnie Mae securities.  Earlier this year, a group of 12 senators introduced the “Protecting Veterans from Predatory Lending Act of 2018.” The bill would require lenders to demonstrate a “material benefit” to consumers when refinancing their mortgage.


Metrics for some commonly traded structures are below:




Michael S. Erhardt, CPA

Senior Vice President

Investment Strategist

Vining Sparks, IBG

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