What is Ginnie Mae?

What does Ginnie Mae do?

Ginnie Mae doesn’t originate or purchase mortgages. Instead, it guarantees that investors in certain mortgage-backed securities (MBSs) will receive a portion of the payments that borrowers make on their government-backed mortgages.

This guarantee makes MBSs with federally insured loans more attractive to investors. Without this guarantee, investors would be more at risk when buying securities backed by loans to people like first-time homebuyers or those with low credit scores.

“Ginnie Mae is NOT a lender,” explained Kevin Leibowitz, founder of Grayton Mortgage. He noted that mortgages backed by government entities like the Federal Housing Administration (FHA), Department of Veterans Affairs (VA) and U.S. Department of Agriculture (USDA) “are pooled into mortgage-backed securities” that are guaranteed by Ginnie Mae.

“Those securities are sold by the issuers (banks/nonbanks) in the secondary market. The buyers of these securities know that they are guaranteed by the full faith and credit of the U.S. government.”

» MORE: What is a mortgage?

How Ginnie Mae differs from Fannie Mae and Freddie Mac

“Ginnie Mae is government-owned; they handle mortgages that are insured or guaranteed by federal agencies,” said Melissa Cohn, regional vice president at William Raveis Mortgage. “Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs), while Ginnie Mae is a government enterprise.”

Ginnie Mae does not own mortgages or MBSs, nor does it set underwriting or credit requirements. On the other hand, Fannie Mae and Freddie Mac both purchase conventional mortgage loans from lenders in order to package and resell those loans as MBSs to investors. These GSEs establish specific underwriting guidelines for their approved lenders.

Conventional mortgages typically carry stricter underwriting requirements than government-insured loans. For example, the minimum credit score for a conventional mortgage is typically 620, but you can qualify for an FHA mortgage with a score as low as 500.

Is Ginnie Mae the same as FHA?

Ginnie Mae and the FHA are two separate entities. The FHA sets its own mortgage requirements and guarantees federally insured mortgages that are often taken out by first-time and low- to moderate-income homebuyers.

Ginnie Mae is responsible for guaranteeing MBSs that include federally insured mortgages, which helps keep interest rates on those mortgages low. According to Ginnie Mae, FHA-insured mortgages accounted for 60.8% of issuance in Ginnie Mae pools in 2022. 

» MORE: Conventional mortgage vs. FHA

What types of loans does Ginnie Mae secure?

Ginnie Mae doesn’t technically secure loans. It guarantees MBSs comprised of various types of government-backed loans, including FHA loans, VA loans, USDA loans and Section 184 loans.

• FHA loans are insured by the federal government through the Federal Housing Administration. FHA-backed loans, such as the Basic Home Mortgage Loan 203(b), are a popular choice among first-time homebuyers because of their low down payment requirements (as low as 3.5%). According to Leibowitz, FHA loans are best for homebuyers with weak credit, those who can’t make a large down payment or those who have experienced bankruptcy or foreclosure.
• VA loans are guaranteed by the Department of Veterans Affairs and are available to military veterans, service members and their surviving spouses. VA-backed loans typically have no down payment requirements.
• USDA loans are guaranteed by the U.S. Department of Agriculture. These loans help low- to moderate-income borrowers in rural areas qualify for mortgages.
• Section 184 loans are guaranteed home loans made to Native American homebuyers. These loans are offered by the U.S. Department of Housing and Urban Development’s Office of Native American Programs.

Bottom line

While Ginnie Mae does not originate or sell home loans, it can play an important part in your homebuying journey as a behind-the-scenes guardian of the mortgage market. If you're considering an FHA, VA, USDA or other government-backed loan, Ginnie Mae makes it possible for your lender to offer you more favorable terms and competitive interest rates.