Adjustable Rate Mortgage-Backed Securities

Ginnie Mae adjustable rate MBS are issued only under the Ginnie Mae II MBS as multiple issuer or custom pools. As with all Ginnie Mae II MBS, the individual issuer passes principal and interest payments and any prepayments monthly through to Ginnie Mae's paying agent, who in turn pays the MBS holders. Again, as with all Ginnie Mae II MBS, issuers can participate in the ARM program with a minimum of $250,000 in adjustable rate mortgage loans.

Ginnie Mae offers programs to accommodate the traditional 1-year ARM, as well as the more recent Hybrid ARMs.

Eligible Mortgages for Adjustable Rate MBS:

• The mortgages provide annual interest and annual payment adjustments.
• Annual adjustments are based on the U.S. Treasury one-year constant maturity weekly average index.
• Adjustments are calculated by the addition of a "margin" to the current index.
• The first adjustment is 12 to 18 months after the first payment date and becomes annual thereafter. Custom pools allow the first adjustment to take place during the first 12 months.
• The mortgages provide a one percent floor and cap on annual interest rate changes, and a five percent floor and cap on interest rate changes over the life of the loan.
• Payments are recalculated each year to fully amortize the loan, with level payments over the remaining life of the loan.
• Annual interest rates are rounded to the nearest 1/8th percent.
• Buydown mortgages are eligible.
• Graduated Payment Mortgages (GPMs) are not eligible.

Eligible Mortgages for 3-, 5-, 7-, and 10-year Hybrid MBS:

• Eligible as multiple issuer loan packages under the Ginnie Mae II MBS program.
• Backed by FHA 3-, 5-, 7-, and 10-year hybrid ARMs and VA 3- and 5-year hybrid ARMs.
• The mortgages provide a fixed-rate payment for an initial 3-, 5-, 7- or 10-year period and annual payment adjustments subsequently.
• Subsequent adjustments are made annually and are based upon the weekly average yield of US Treasury securities adjusted to a constant maturity on one year.
• Adjustments are calculated by the addition of a "margin" to the current index, rounded to the nearest
  1/8th %.
• The 3- and 5-year hybrid ARMs allow a one percentage point annual interest rate adjustment after the initial fixed-interest rate period and a five percent rate cap over the life of the loan. The 7- and 10-year hybrid ARMs allow a two percentage point annual interest rate adjustment after the initial fixed-interest rate period and a six percent rate cap over the life of the loan.
• The initial security adjustment date will be no sooner than 1 or no later than 3 months after the expiration of the initial fixed-rate period. Consistent with the existing FHA 1-year ARM, the hybrid ARM adjustment dates also will be January 1, April 1, July 1, and October 1.
• Buydown mortgages are not eligible.