The Next Fix

The Government National Mortgage Association (GNMA), more commonly known as Ginnie Mae, is an agency of the United States government whose purpose is to make it easier for some of the country’s citizens to purchase their own homes and to tackle any mortgage crisis in the country. It does not interact directly with would-be home owners. Instead, it is active in the secondary market for home mortgages, where it offers payment guarantees on mortgages which have been approved by other agencies of the United States government, such as the Federal Housing Association (FHA) or the Department of Veterans’ Affairs.

The secondary market for mortgages is one in which financial institutions bundle up individual mortgages which they have issued to customers and resell the bundles to a third party in the form of a financial instrument known as a mortgage-backed security (MBS). The third party will then receive the payments that would normally have been made on those mortgages, rather than the originating institution. Ginnie Mae acts as a guarantor of these payments for bundles in which all of the mortgages meet its operating criteria. Because these mortgage-backed securities are guaranteed by theUnited States government, they are regarded as highly secure, on a par with Treasury bonds for example, so they are readily resaleable.