Government National Mortgage Association

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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 Housing and Urban Development Department, 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 has hired consultants to market its residential mortgage pools.

GNMA continues to streamline its documentation procedures and make efforts to eliminate paperwork, such as accepting electronic confirmation of insurance rather than relying on paper insurance certificates. It has begun an ambitious program to increase home ownership by minority families. Since its inception in 1968, GNMA has given more than 27 million families access to affordable mortgage costs. On November 20, 2002, GNMA announced that it had overseen the origination of $2 trillion in mortgage-backed securities.

Further readings

Benson, John D. 1991. "Ending the Turf Wars: Support for a CFTC/SEC Consolidation." Villanova Law Review 36.

Ginnie Mae. Available online at <www.ginniemae.gov/index.asp> (accessed July 26, 2003).

Hadaway, Beverly L., and Paula C. Murray. 1986. "Mortgage Backed Securities: An Investigation of Legal and Financial Issues." Journal of Corporation Law 11.

Malloy, Robin P. 1986. "The Secondary Mortgage Market: A Catalyst for Change in Real Estate Transactions." Southwestern Law Journal 39.

Cross-references

Corporations; Credit; Mortgage.

References in periodicals archive ?
We heard about Fannie Mae and Ginny Mae and Mother May I?
Bache continued, "We have made several major acquisitions, and both our Capital Markets Group and the Mortgage Securities Division have extensive experience in packaging FHA and VA insured loans into GNMA (pronounced Ginny Mae -- stands for Government National Mortgage Association) securities, and that combined with our large network of approved correspondents will serve as a solid foundation to fuel an existing successful wholesale government loan operation.
My hope is that through CMIS, a set of 'best practices' will emerge for the mortgage industry that is sanctioned by the legislative, judicial and regulatory branches of the government, private investors and government sponsored enterprises -- including Fannie Mae, Freddie Mac and Ginny Mae - as well as borrowers, mortgage holders and servicers," Taylor added.