Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.1 6/24/83; site mmintl.UUCP Path: utzoo!watmath!clyde!bonnie!akgua!whuxlm!whuxl!houxm!vax135!cornell!uw-beaver!tektronix!hplabs!pesnta!amd!amdcad!amdimage!prls!philabs!pwa-b!mmintl!franka From: franka@mmintl.UUCP (Frank Adams) Newsgroups: net.invest Subject: Re: Info on \"Ginny Maes\" Message-ID: <726@mmintl.UUCP> Date: Wed, 23-Oct-85 15:50:04 EST Article-I.D.: mmintl.726 Posted: Wed Oct 23 15:50:04 1985 Date-Received: Tue, 29-Oct-85 04:25:25 EST References: <844@dec-yogi.UUCP> <13000005@tilt.FUN> Reply-To: franka@mmintl.UUCP (Frank Adams) Organization: Multimate International, E. Hartford, CT Lines: 18 In article <13000005@tilt.FUN> stern@tilt.FUN writes: >(b) If interest rates suddenly drop, there is a chance the mortgage you bought >will be paid off early (the person accepting the loan borrows more money at >the lower rate, and pays off the expensive loan). If this happens, your nice >fat return goes away and you have to shop for something comparable. A small clarification here -- when you buy into a GNMA, you aren't buy a mortgage, but a small piece of a lot of mortgages. Thus when interest rates drop, there is a near certainty that an increased number of the component mortgages will be paid off; thus you get more principle now and less interest later. This points out one of the other problems with GNMAs -- you don't know how much you will receive each month. If you need a predictable cash flow, look for something else. Frank Adams ihpn4!philabs!pwa-b!mmintl!franka Multimate International 52 Oakland Ave North E. Hartford, CT 06108