What is Ginnie Mae?

This government corporation makes housing more affordable

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When you start shopping for a home, you’ll probably see some interesting names thrown around, like Ginnie Mae, Fannie Mae and Freddie Mac. Though they might vaguely sound like people you went to high school with, these acronyms actually stand for critical institutions in the U.S. housing market.

Ginnie Mae is the Government National Mortgage Association, and it makes affordable housing accessible to millions of low- to moderate-income individuals and families. It is a government-owned corporation that guarantees the principal and interest payments on securities backed by federally insured or guaranteed mortgages.

Ginnie Mae does not offer direct loans to homebuyers, but it allows lenders to obtain a better price for guaranteed and insured mortgage loans on the secondary mortgage market — meaning more savings and flexible credit requirements are passed on to you, the buyer.

Key insights

  • Ginnie Mae guarantees payments on securities backed by certain government-insured or guaranteed mortgages.
  • Mortgage-backed securities guaranteed by Ginnie Mae are appealing to investors, which makes government-backed loans attractive to lenders.
  • Ginnie Mae helps a wide spectrum of borrowers qualify for home loans because its guarantees make mortgage lenders and investors feel more confident.

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.

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    How does Ginnie Mae impact the housing market?

    Ginnie Mae plays a critical role in the housing market by providing liquidity to mortgage lenders. Its guarantee of MBSs containing government-insured loans attracts investors, which enables lenders to continue providing mortgages to homebuyers. In the first half of 2023, Ginnie Mae facilitated the pooling and securitization of over 294,000 first-time homebuyer loans.

    Who can invest in Ginnie Mae securities?

    Ginnie Mae securities are backed by the full faith and credit of the U.S. government, making them a popular choice for investors seeking safe and stable investments. They are available for purchase by individuals, institutional investors and foreign entities.

    Are Ginnie Mae securities risk-free?

    While Ginnie Mae securities are backed by the U.S. government, they are not completely risk-free. However, Ginnie Mae does have a good track record, and its site emphasizes that it has never needed a government bailout and does not carry long-term debt.

    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.

    Article sources
    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
    1. Ginnie Mae, “ Who We Are .” Accessed June 23, 2023.
    2. Ginnie Mae, “ 2022 Annual Report .” Accessed June 23, 2023.
    3. DS News, “ Ginnie Mae’s MBS Portfolio Reaches $2.422T in June .” Accessed June 23, 2023.
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