Ginnie Mae Frequently Asked Questions

What is the Government National Mortgage Association (Ginnie Mae)?

Ginnie Mae was created in 1968 as a wholly-owned government corporation within the U.S. Department of Housing and Urban Development (HUD). Ginnie Mae guarantees the principal and interest payments on mortgage-backed securities (MBS) issued by program participants. The securities are collateralized by the cash flows from loans insured or guaranteed by the Federal Housing Administration (FHA), Department of Veterans Affairs Home Loan Program for Veterans (VA), Office of Public and Indian Housing (PIH), and the U.S. Department of Agriculture Rural Development (RD). The Ginnie Mae guaranty assures investors that they will receive their monthly principal and interest payments on outstanding securities in a timely manner. The Ginnie Mae MBS guaranty is the only MBS guaranty explicitly backed by the full faith and credit of the U.S. Government.

What is the purpose of Ginnie Mae?

Ginnie Mae's mission is to expand affordable housing by linking global capital markets to the nation's housing markets. Ginnie Mae achieves its mission by guaranteeing investors the timely payment of principal and interest on their MBS. Bundling mortgage loans into MBS makes it easier to sell large groups of them to investors in the secondary market.

The ability of lenders to package these loans into securities for sale to investors worldwide enables the lender to then use the proceeds to make more mortgage loans. Repeating this cycle increases the availability, accessibility, and affordability of mortgage funds for Americans.

Since its inception, Ginnie Mae has guaranteed approximately $4 trillion in MBS, providing access to affordable housing for millions of low- and moderate-income Americans and creating homeownership opportunities in every U.S. state and territory.

What is the difference between Ginnie Mae, Fannie Mae, and Freddie Mac?

Ginnie Mae is a self-sustaining, profitable, wholly-owned government corporation. Ginnie Mae securities are the only MBS that enjoy the full faith and credit guaranty of the U.S. Government.

Fannie Mae and Freddie Mac are both federally chartered corporations. In September 2008, the Government-Sponsored Enterprises (GSEs) were placed under government conservatorship. Fannie Mae and Freddie Mac purchase mortgages to hold in their own portfolios or to issue securities for sale to investors.

Ginnie Mae does not purchase mortgages, nor does it buy, sell, or issue MBS. Ginnie Mae does not issue debt securities or hold an MBS investment portfolio.¹  Private lending institutions approved by Ginnie Mae issue the MBS for which Ginnie Mae provides a guaranty. Moreover, Ginnie Mae only securitizes federally-insured or guaranteed loans.

Originally, Ginnie Mae and Fannie Mae began as one organization, known as the Federal National Mortgage Association (FNMA). However, in 1968, Congress partitioned FNMA into two entities: Fannie Mae and Ginnie Mae. Fannie Mae was charged with supporting the conventional market and Ginnie Mae was charged with supporting the market for FHA, VA, RD, and PIH loans.

How are FHA and Ginnie Mae connected?

In effect, Ginnie Mae serves as the banker for FHA, VA, and other government mortgage insurers. The capital used to finance government insured and guaranteed mortgage loans is raised through Ginnie Mae MBS. FHA and other government agencies insure or guarantee the lender in case of a borrower default, while Ginnie Mae guarantees the investor in case of a lender default.

Lenders originate the FHA, VA, or PIH mortgage loans and package them into MBS, which are then guaranteed by Ginnie Mae. Ginnie Mae securitizes more than 99 percent of FHA mortgages and 98 percent of VA mortgages.

Since Ginnie Mae is a wholly-owned government corporation within HUD, the President of Ginnie Mae and the FHA Commissioner both report to the Secretary of HUD.

Does Ginnie Mae buy loans?

No, Ginnie Mae does not purchase loans from mortgage lenders or make loans to consumers.²  Rather, it is the guarantor of securities issued by approved lenders who participate in its programs. Ginnie Mae guarantees MBS originated by approved Issuers (mortgage lenders who meet the requirements and are approved to issue Ginnie Mae MBS).

How is Ginnie Mae funded?

Ginnie Mae is a self-financed corporation that uses the fees it collects to fund its operations. Operations are financed by a variety of fees including guaranty fees, new Issuer application fees, commitment fees, and transfer of service fees. In addition, Ginnie Mae receives revenue from the interest earned on its capital reserves. For FY 2011, Ginnie Mae had net revenue of $1.2 billion and $15.8 billion in capital.

How does one become an approved Ginnie Mae issuer?

Issuers of Ginnie Mae MBS (program participants) make an important contribution to the expansion of affordable housing in America. Therefore, applicants must demonstrate that they have the organizational, financial, procedural, and quality assurance practices that will qualify them to participate in the program.

The following is a list of some of the application requirements:

• Approved FHA mortgage lender in good standing
• Audited financial statements
• Net worth requirements:
  • Single-family participant requirement: $2.5 million, must be met by current Issuers
    by October 1, 2011
  • Multifamily participant requirement: $1 million
  • HECM participant requirement: $5 million, must be met by current Issuers by October 1, 2011
  • Manufactured housing participant requirement: $10 million
• Fidelity Bond and Errors and Omission insurance coverage
• Disclosure of all related and affiliate party transactions
• Cross-default agreements (if applicable)
• Corporate guaranty agreements (if applicable)
• Quality control plans for underwriting, originating, and servicing mortgage loans
• Resumes of officers
• Third-party reports on officers and the company
• Status with GSEs and primary regulator

The Ginnie Mae Mortgage-Backed Securities Guide is an excellent resource when applying for issuer status. Please visit www.ginniemae.gov to view this document and other forms containing these requirements. For additional information on becoming a Ginnie Mae issuer, please contact Leonora Noel at Ginnie Mae's Office of Mortgage-Backed Securities at (202) 708-1535.

How can one obtain Ginnie Mae updates?

Ginnie Mae's program updates are primarily communicated through an "All Participants Memorandum" (APM) or through a "Multiclass Participants Memorandum" (MPM). APMs and MPMs are sent periodically to Ginnie Mae business partners and are also available on Ginnie Mae's website.

Ginnie Mae is always seeking new and innovative ways to improve upon its programs. To receive timely updates about Ginnie Mae programs, visit our website's MPMs, APMs, and Media Sections and subscribe to Ginnie Mae's "E-alert" service. You will then be notified of important announcements or changes to our programs.

Is Ginnie Mae involved with reverse mortgages [Home Equity Conversion Mortgages(HECM])?

Yes, Ginnie Mae does securitize FHA HECMs. Ginnie Mae's first Home Equity Conversion Mortgage Backed Securities (HMBS) was issued in November 2007.

What is the difference between Ginnie I and Ginnie II?

Ginnie Mae operates two MBS pass-through securities: the Ginnie Mae I MBS and the Ginnie Mae II MBS. Securities issued under the Ginnie Mae MBS program carry the same guaranty; however, each MBS has different characteristics. The following chart highlights some of the differences between the two programs.

¹ Ginnie Mae does not purchase loans from lenders. Ginnie Mae does service defaulted MBS portfolios and occasionally repurchases loans from these defaulted portfolios. These purchases are incidental to its core business operations.

² Ginnie Mae does not purchase loans from lenders. When issuing a Ginnie Mae security, lenders remain financially responsible for the performance of securities including advancing delinquent payments.

For more information about Ginnie Mae, please contact Terry Carr, Senior Advisor, Marketing and Communications, at (202) 475-7812.