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 ?
Under GNMA and FNMA servicing rules, unscheduled principal payments received by servicers during the preceding month are remitted to investors on the 15th and 18th of the current month, respectively.
Borrowers using loans backed by GNMA may differ from those using loans supported by FNMA and FHLMC for another reason.
MBA is very pleased that GNMA made the decision to apply the ACH debit transfer prospectively so that outstanding guaranty agreements would not be amended.
The company is one of the most successful direct to consumer lenders in the United States and is the region's largest and most well known FHA direct lenders and is a GNMA approved mortgage backed securities issuer.
The benchmark yield spread of current-coupon GNMA securities versus the 10-year Treasury bond will eventually widen by 10 to 15 basis points to around 100 by late 1993 from 85 at year-end 1992.
Accordingly, mortgage-backed, pass-through securities guaranteed by GNMA will have a risk weight of 0 percent.
In January 1990, the C&L Risk Analysis Group began working with GNMA management to implement the ARRC concept.
If R-G Premier obtains approvals from GNMA and FNMA, it is the Company's intent to have R&G Mortgage transfer its existing servicing operations, including its servicing contracts and rights, to R-G Premier.
As everyone is well aware, there are more differences between the GNMA I and II securities to account for the pricing differential, than simply the presence of buydown loans.
The July distribution of 87 cents per unit includes the following: * 1 cent per unit regular cash flow; * 2 cents per unit mortgage proceeds due to the prepayment of the mortgage on Stafford Towers; and * 84 cents per unit mortgage proceeds due to the sale of the GNMA security secured by the mortgage on Oak Forest Apartments II.
Structure: The rating also reflects the pass-through structure of the MBS transaction as payments of principal and interest are directly passed through to the bondholders each month as the GNMA securities are paid.
5 million balance of a 7% GNMA secured funding note resulting in an expected annualized cost savings of approximately $1.