Ginnie Mae

A security issued by the Government National Mortgage Association and secured by mortgages serviced by certain federal agencies.

[Alteration of G(overnment) N(ational) M(ortgage) A(ssociation).]

Type: Government-owned
On the web: http://www.ginniemae.gov

Ginnie Mae is government-owned corporation operating within the US Department of Housing and Urban Development (HUD). More formally known as the Government National Mortgage Association, Ginnie Mae doesn't buy or sell loans or issue mortgage-backed securities. Rather, it manages the mortgage-backed securities program, providing liquidity, allowing lenders to obtain better prices for their loans on the secondary market, and lowering costs for homebuyers and renters throughout the nation, particularly low- to moderate-income Americans. Since its creation in 1968, Ginnie Mae has guaranteed more than $2.5 trillion in mortgage-backed securities and helped more than 34 million Americans secure affordable housing.

Key numbers for fiscal year ending September, 2007:
Sales: $791.3M
One year growth: (6.8%)

Officers:
President: Joseph J. Murin
EVP: Michael J. Frenz
SVP Finance and CFO: Michael J. (Mike) Najjum Jr.

A U.S. government corporation within the U.S. Department of Housing and Urban Development (HUD). Ginnie May aims to:

1. Ensure liquidity for government-insured mortgages, including those insured by the Federal Housing Administration (FHA), the Veterans Administration (VA) and the Rural Housing Administration (RHA).
2. Bring investors' capital into the market for these types of loans, so that the issuers have the means to issue more.

Most of the mortgages securitized as Ginnie Mae mortgage-backed securities (MBSs) are those guaranteed by FHA, which are typically mortgages for first-time home buyers and low-income borrowers.

Investopedia Says:
Ginnie Mae neither issues, sells or buys pass-through mortgage-backed securities, nor does it purchase mortgage loans. It simply guarantees (insures) the timely payment of principal and interest from approved issuers (such as mortgage bankers, savings and loans, and commercial banks) of qualifying loans, such as those issued by the FHA and RHA.

Unlike its cousins Freddie Mac, Fannie Mae and Sallie Mae, Ginnie Mae is not a publicly-traded company. An investor in a GNMA security will not know who the underlying issuer of the mortgages is, but merely that the security is guaranteed by GNMA, which is backed by the full faith and credit of the U.S government, just like U.S. Treasuries.

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Informal name for the Government National Mortgage Association, a federal agency under the Department of Housing and Urban Development (HUD). Ginnie Mae guarantees the timely payment of monthly principal and interest, with the full faith and credit support of the U.S. Government, on mortgage pass-through securities backed by federally insured or guaranteed mortgage loans. It does not issues mortgage-backed securities in its own name. [Ginnie Mae works with approved lenders, adding its guarantee to residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or to loans originated under the Department of Agriculture's Rural Housing Service and the Department of Housing and Urban Development's Office of Public and Indian Housing.] Ginnie Mae was created in 1968, when the Federal National Mortgage Association (Fannie Mae) was spun off from HUD and became a stand-alone corporation. In 1970 Ginnie Mae guaranteed the first publicly traded mortgage pass-through securities representing an undivided interest in FHA loans and VA loans. See also Freddie Mac; Ginnie Mae Pass-Through.

Nickname for Government National Mortgage Association.

The Government National Mortgage Association (GNMA), also known as Ginnie Mae, is a corporation wholly owned by the federal government. Created by the Housing and Urban Development Act of 1968, 825 Stat. 491, GNMA is designed to support the federal government's housing programs by establishing a secondary market for the sale and purchase of residential mortgages.

During the late 1960s, the federal government expressed concern that available credit for low-income housing was insufficient to meet the growing demand. In response GNMA began issuing certificates to obtain additional funds for government-backed low-income mortgages. GNMA certificates entitle their holders to receive a portion of the income derived from a residential mortgage pool approved by the government.

A residential mortgage pool consists of a group of mortgages that are issued by private lenders, including commercial banks and savings and loan institutions. The mortgages in this group have similar terms and interest rates. If the pool is approved by GNMA, it is placed into a trust, from which it is sold to investors by securities dealers. Some pools include more than one thousand residential mortgages.

The revenue generated by the sale of these pools helps make additional credit available for low-income residential mortgages insured by government agencies such as the Federal Housing Administration (FHA), the Veterans Administration (VA), and the Farmers Home Administration. The Department of Housing and Urban Development, which is responsible for administering GNMA, oversees the entire program.

GNMA mortgage pools are considered stable investments by securities dealers and investors alike. The timely payment of principal and interest on each mortgage is guaranteed by GNMA and the full faith and credit of the federal government. GNMA enjoys unlimited authority to borrow funds from the U.S. Treasury in order to make good on this guarantee.

By developing a stable and viable secondary market for government-backed residential mortgages, GNMA has originated more than $1 trillion in securities trading. The revenue generated through this secondary market has enabled more than 19 million low-income families to purchase homes, and provided the U.S. Treasury with annual receipts sometimes exceeding $400 million.

In 1994 President Bill Clinton outlined the National Homeowners Strategy, which spurred GNMA to undertake an intense and sweeping review of its practices and programs. In addition, GNMA has been working to satisfy internal mandates that require it to enhance its customer service, improve its relations with other businesses, and better market its securities. GNMA has incorporated the latest technology and automation to achieve these goals, and hired consultants to market its residential mortgage pools.

Government National Mortgage Association

The Government National Mortgage Association (GNMA, also known as Ginnie Mae) is a U.S. government-owned corporation within the Department of Housing and Urban Development (HUD).

Ginnie Mae provides guarantees on mortgage-backed securities (MBS) backed by federally insured or guaranteed loans, mainly loans issued by the Federal Housing Administration, Department of Veterans Affairs, Rural Housing Service, and Office of Public and Indian Housing. Ginnie Mae securities are the only MBS that are guaranteed by the United States government.

The GNMA was created by the United States Federal Government through a 1968 partition of the Federal National Mortgage Association. As with other government sponsored enterprises, Ginnie Mae uses a creative acronym of the company's full name, adopted officially for ease of identification.

Contents 1 Business 2 See also 2.1 Companies 3 External links

Business

GNMA securities provide a connection between the capital markets and mortgage borrowers; investors purchase mortgage-backed securities (MBS also called RMBS), and borrowers gain access to investor funds. Capital market funding through MBS is much more efficient^{[citation needed]} and provides a much larger funding base than traditional deposit-funding (e.g., Savings and Loan model circa pre-1989 savings and loan crisis).

GNMA primarily does two things. First, it provides a computer platform that efficiently pools mortgages into bonds from pre-approved lenders. Second, GNMA provides, for 6 basis points of the outstanding principal balance of a bond, a guarantee of timely payment of principal and interest; this is essentially a guarantee that the United States government will continue to pay investors even if the underlying collateral (government insured mortgages) defaults. GNMA securities thus have the same credit rating as the government of the United States and for capital purposes have risk-weighting of zero.

GNMA guarantees the following types of securities:

1. GNMA I securities. A GNMA I (Ginnie Mae one) represents a pool of mortgages all issued by one issuer, all with the same interest rate, and all issued within a three month period. This is a basic pass-through security.
2. GNMA II securities. A GNMA II (Ginnie Mae two) is also a pass-through security, except that the collateral can have a range of interest rates and can include mortgages issued by more than one issuer. In this case, the service fees (see below) vary, so that the new interest rate being paid to the investor from each mortgage is the same.
3. GNMA "REMIC" securities. A REMIC (Real Estate Mortgage Investment Conduit), also known as a CMO, is an additional level of securitization. The collateral pool for a REMIC consists not of mortgages, but of mortgage-backed securities (such as GNMA I, GNMA II, or previously issued REMICs).

Pools are created by lenders. For example, a mortgage lender may sign up 100 home mortgages in which each buyer agreed to pay a fixed interest rate of 6% for a 30-year term. The lender (who must be an approved issuer of GNMA certificates) obtains a guarantee from the GNMA and then sells the entire pool of mortgages to a bond dealer in the form of a "GNMA certificate". The bond dealer then sells GNMA mortgage-backed securities, paying 5.5% in this case and backed by these mortgages, to investors. The original lender continues to collect payments from the home buyers and forward the money to a paying agent who pays the holders of the bonds.

As these payments come in, the paying agent pays the principal that the home owners pay (or, if some home owners fail to make the scheduled payment, the amount that they are scheduled to pay) and the 5.5% bond coupon payments to the investors. The difference between the 6% interest rate paid by the home owner and the 5.5% interest rate received by the investors consists of two components. Part of it is a guarantee fee (which GNMA gets) and part is a "servicing" fee, meaning a fee for collecting the monthly payments and dealing with the homeowner. If a home buyer defaults on payments, GNMA pays the bond coupon, as well as the scheduled principal payment each month, until the property is foreclosed. If (as is often the case) there is a shortfall (meaning a loss) after a foreclosure, GNMA still makes a full payment to the investor. If a home buyer prematurely pays off all or part of his loan, that portion of the bond is retired, or "called", the investor is paid accordingly, and no longer earns interest on that proportion of his bond.

The GNMA said in its 2003 annual report that, over its history, it had guaranteed securities on the mortgages for over 30 million homes totaling over $2 trillion. It guaranteed $215.8 billion in these securities for the purchase or refinance of 2.4 million homes in 2003.

See also

• Agency Securities
• Mortgage
• Mortgage loan
• Real Estate
• Mortgage GSE controversy

Companies

• Fannie Mae
• Federal Home Loan Banks
• Freddie Mac
• Farmer Mac
• USA Funds

External links

• Ginnie Mae homepage

v • d • e Agencies of the United States Department of Housing and Urban Development Secretary of Housing and Urban Development Office of Small and Disadvantaged Business Utilization · Office of HUD Administrative Law Judges · Federal Housing Finance Agency · Office of Departmental Equal Employment Opportunity Deputy Secretary of Housing and Urban Development Community Development Block Grant · Office of Fair Housing and Equal Opportunity · Federal Housing Administration · Government National Mortgage Association · Office of Policy Development and Research · Office of Public and Indian Housing

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