Ginnie Mae and her kin still look good

Rising interest rates are threatening the recovery in the housing business, but they are no threat to the investors who are playing in the mortgage-backed securities market.

High interest rates and yields have lit up the market for securities issued by the Federal Home Loan Mortgage Corporation (''Freddie Mac''), the Federal National Mortgage Association (''Fannie Mae''), and especially the Government National Mortgage Association (''Ginnie Mae'').

Ginnie Mae issued over $50 billion in securities last year, a spokesman reports, compared with $16 billion the year before. The pace so far in 1984 is somewhat slower than last year's because higher rates have put a crimp on the housing market, but yields on Ginnie Maes remain quite high. An $8,000 investment can provide a 12 percent return, says Gary Peters, senior vice-president in the mortgage-backed securities department at Butcher & Singer. The full $25,000 purchase price for sole ownership of a Ginnie Mae is paying 13 percent, he says.

You can also get into Ginnie Mae pools or mutual funds for as little as $1, 000, but the returns will be correspondingly lower.

In addition to fairly high returns, Ginnie Maes are backed by the full faith and credit of the US government. Freddie Mac and Fannie Mae, being basically private corporations, do not have this federal backing. All three, however, are backed by the tendency of homeowners to keep up their mortgage payments.

But the yields on Ginnie Maes and Freddie Macs may not be as high as some brokers and dealers are claiming, Mr. Peters says.

The problem comes with something called ''speed.'' Many of the mortgage-backed securities are sold in pools, or unit trusts. A pool with a speed of zero would be one in which none of the mortgages in the pool were paid off early, no homeowners made early payments, and no homes were sold before the end of the mortgage. The fact that these events, especially the last one, are very unlikely means people who sell securities pools use a higher speed. A common one is 50 percent.

To get the actual yield in a Ginnie Mae pool, you need to know how fast the securities in the pool have been returning their principal. The faster the return, the higher the yield.

Brokers, however, often offer very tempting yields on the securities by claiming they have a rapid ''historical'' rate of return.

''Using so-called historical data is totally meaningless,'' Mr. Peters says. ''That (historical) is a word that was coined by the brokers who didn't have anything else to go on.''

Now they do have something to go on, he says. Instead of listening to claims about historical rates of return, which are based on payment schedules that haven't happened for several years, if ever, an investor should ask about the ''actual'' rate of return over the past two years. They may find they are passing up a better yield than the one the broker is trying to sell them.

In an example Peters uses, one pool is advertised with a 12.50 percent yield. But this is based on that historical rate of return, which is higher than what will really happen. Based on the past two years' actual experience, the investor could expect a yield of 10.72 percent.

A better pool (both of these have been on the market recently) is advertised with a minimum yield of 11.79 percent, less than the advertised rate on the first pool. But the second pool's actual yield, based on the speed, or rate or return for the past two years, is 11.84 percent, more than a percentage point greater than the first pool.

Apart from the varying effects of speed, there are some additional things investors in Ginnie Maes and other mortgage-backed securities need to be aware of. If monthly cash flows and high interest rates are two of the biggest attractions for these investments, they can also be the cause of the biggest drawbacks.

First, if you buy into one of these now, and interest rates continue their present upward trend, the value of your securities will fall in a corresponding manner. So if you need to sell your securities before all the principal and interest are repaid, you may lose part of your initial investment.

On the other had, if interest rates do keep going up, you can take the money that is coming back and reinvest it at a higher rate.

Then, of course, interest rates can also fall. If this happens, many homeowners can be expected to refinance their homes at lower rates, which would pay off the mortgages in your pool even earlier.

It is often said to be a disadvantage that investors in mortgage-backed securities are getting back part of their prinicpal as well as interest. For some people, though, having both principal and interest come back over an eight-year span, for example, may fit in nicely with their financial and tax plans.

One thing to watch for are pools advertising a yield that is much higher than seems to be the norm in the industry. Peters says he has seen an advertisement for a broker offering a 16 percent yield on a pool of Freddie Mac securities. But that rate is based on the historical (that word again) experience of Federal Housing Administration loans. The problem is that there are no FHA loans in Freddie Mac. Only Ginnie Mae has them.

If you would like a question considered for publication in this column, please send it to Moneywise, The Christian Science Monitor, One Norway Street, Boston, Mass. 02115. No personal replies can be given by mail or phone. References to investments are not an endorsement or recommendation by this newspaper.

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