Ginnie Mae

Ginnie Mae

Ginnie Mae is a slang term universally used to denote the Federally owned corporate entity that purchases, on the secondary market, residential real estate mortgages that were originated by local lenders. Ginnie Mae, or the association, then issues federally insured securities backed by the mortgages. The real abbreviation is GNMA, standing for the Government National Mortgage Association.

The Ginnie Mae guaranty allows mortgage lenders to obtain a better price for their mortgage loans in the secondary market. The lenders can then use the proceeds to make new mortgage loans available.

Ginnie Mae does not buy or sell loans or issue mortgage-backed securities (MBS). What Ginnie Mae does is guarantee investors the timely payment of principal and interest on MBS backed by federally insured or guaranteed loans, mainly loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Other guarantors or issuers of loans eligible as collateral for Ginnie Mae MBS include the Department of Agriculture's Rural Housing Service (RHS), and the Department of Housing and Urban Development's Office of Public and Indian Housing (PIH).

Ginnie Mae securities are the only MBS to carry the full faith and credit guaranty of the United States government, which means that even in difficult times an investment in Ginnie Mae MBS is one of the safest an investor can make.

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