Question:

What are Ginnie Mae mortgage backed securities (MBSs)?

Answer:

Ginnie Mae mortgage backed securities (MBSs) are mortgage loans who are packed as collateral for securities issued in the secondary market. The most distinguishable feature of Ginnie Mae mortgage-backed securities is that they are fully backed by the US government.

Freddie Mac and Fannie Mae are also said to have been backed by the US Government. However, this is 100% true for Ginnie Mae securities only.

Ginnie Mae doesn't buy or sell loans nor issue MBSs.

Ginnie Mae guarantees that principal and interest on MBSs backed by federally guaranteed loans will be paid on time. That is, mortgage loans insured by the Federal Housing Administration (FHA), the Department of Veteran Affairs (VA), the Department of Agriculture's Rural Housing Service (RHS), and the HUD's Public and Indian Housing (PIH).

Some History on Ginnie Mae and Mortgage Loans

In 1938 during the Great Depression the Congress created Fannie Mae - the Federal National Mortgage Association (FNMA). Its mission is to provide mortgage lenders with enough capital to fund mortgage loans.

Nowadays, Fannie Mae has federal charter, but the fully government-owned corporation within the Department of Housing and Urban Development (HUD) is Ginnie Mae (GNMA) - the Government National Mortgage Association, who were established in 1938.

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