GNMA

Government National Mortgage Association (Ginnie Mae) – a government entity that buys mortgages for low-income housing and guarantees mortgage-backed securities issued by private lenders. GNMA was created by congress in 1968. GNMA is a government-owned agency with two major functions. The first is sponsoring mortgage- backed securities programs by FIs such as banks, thrifts, and mortgage bankers. The second is acting as a guarantor to investors in mortgagebacked securities regarding the timely passthrough of principal and interest payments on their sponsored bonds. In other words, GNMA provides timing insurance. In acting as a sponsor and payment-timing guarantor, GNMA supports only those pools of mortgage loans whose default or credit risk is insured by one of three government agencies: the Federal Housing Administration (FHA), the Veterans Administration (VA), and the Farmers Home Administration (FMHA). Mortgage loans insured by these agencies target groups that might otherwise be disadvantaged in the housing market, such as low-income families, young families, and veterans. As such, the maximum mortgage under the FHA/VA/FMHAGNMA securitization program is capped.