RMBS: U.S. Ginnie Mae Early Buyout Rating Methodology

Introduction

This document describes KBRA’s rating methodology for transactions collateralized by the Federal Housing Administration (FHA) or other federally-insured loans which have typically been bought out of a loan pool backing Ginnie Mae (GNMA) mortgage backed securities (MBS) (so-called “Early Buyouts” or EBOs) for the purpose of re-delivery, liquidation or title conveyance.

In conjunction with this methodology, KBRA employs its Global Structured Finance Counterparty Methodology for assessing counterparty risk in structured finance transactions, to the extent deemed applicable.

Overview

A variety of government agency insured loans are typically delivered into GNMA insured RMBS pools. Such loans are eligible to be bought out of GNMA pools upon reaching specified periods of delinquency. Motivations for such EBOs include relieving…