By Bradley Songer on November 2, 2010
.jpg.aspx?width=75&height=75) Ginnie Mae is also known as the Government National Mortgage Association (GNMA). It was established in the United States in 1968 during the Great Depression to promote home ownership. It is a complete government-owned corporation within the Department of Housing and Urban Development (HUD). The Government National Mortgage Association‘s task is to expand affordable housing in the United States by directing capital into the nation’s housing finance markets. The Government National Mortgage Association guarantee enables mortgage lenders to acquire a more reasonable price for their loans in the capital markets. Lenders can use the profit from these transactions to forge new mortgage loans – mortgage loans that will be available to prospective consumers. This assists in lowering the financing costs involved with affordable housing and presents opportunities for sustainable, affordable housing for new families seeking to buy their first homes and experience home ownership for the first time.
The Government National Mortgage Association guarantees the quick payment of principal and interest payments on residential mortgage-backed securities (MBS) to investors globally. These securities and groups of mortgage loans are used as insurance for the issuance of securities in New York City on Wall Street. Mortgage-backed securities are commonly referred to as "pass-through" certificates because the principal and interest of the underlying loans is "passed through" to suitable investors.
Ginnie Mae only guarantees securities backed by two types of families, however: single-family and multifamily. These loans are insured by government agencies, including the FHA, Department of Veterans Affairs, the Department of Housing and Urban Development’s Office of Public and Indian Housing and the Department of Agriculture’s Rural Development.
Ginnie Mae does not create nor purchase mortgage loans - It does not purchase, sell, or issue securities, either. Ginnie Mae does not carry long-term debt on its annual balance sheet. Instead, private lending companies that are approved by Ginnie Mae create eligible loans, group them into securities, and issue the Ginnie Mae mortgage-backed security. These mortgage companies include commercial banks as well as state housing finance agencies.
In 1970, Ginnie Mae became the first establishment to create and guarantee Mortgage-backed securities and has continued to provide needed mortgage funds for those seeking to buy homes ever since. Even in unfortunate times when the nation faces economic downturns, investors are guaranteed payment of the interest and principal in the agreed upon amount and on time. The advantages of this process are passed on to the lenders who can then make more mortgage loans at more affordable rates.
Ginnie Mae logo is a registered service mark of Government National Mortgage Association. |