Ginnie Mae is an acronym for the Government National Mortgage Association which is a government owned corporation. It came into existence when the Federal national association was split into two parts and one was Fannie Mae which was a private enterprise and the other was Ginnie Mae. It comes under the Department of Housing and development (HUD) and was created in 1968.

• Ginnie Mae gives guarantees on mortgage-backed securities (MBS) backed by federally insured or guaranteed loans, mostly loans given by the Federal Housing Administration, Department of Veterans Affairs, Rural Housing Service, and Office of Public and Indian Housing. The only MBS that are guaranteed by the United States government are Ginnie Mae securities.
• A connection between mortgage borrowers and the capital market is provided by Ginnie Mae. This happens when investors purchase mortgage backed securities and borrowers in turn have access to investor funds. The primary functions of Ginnie Mae are providing a computer based platform for pooling mortgages into bonds and providing guarantee for 6 basis points of the outstanding principal along with interest.
• This simply means that Ginnie Mae provides guarantee even if the underlying collateral defaults. In this case the underlying collateral is the government backed securities and therefore Ginnie Mae securities have the same credit rating as that of the government of United States and a risk weightage of zero.
• There are three basic types of Ginnie Mae securities; GNMA I securities, GNMAII securities, and GNMA REMIC securities. The Ginnie Mae one are-frame of three months and all with the same interest rates. Ginnie Mae two are those that are issued by more than one lender and has different interest rates.
• REMIC (Real Estate Mortgage Investment Conduit) is an added level of securitization and is also known as CMO (Collateralized Mortgage Obligation). These do not consist of mortgages but the collateral pool is formed by mortgage backed securities such as GNMA-I, GNMA-II, and previous REMICs.
• GNMA basically guarantees the pools created by a mortgage lender who may create 100 mortgages (for example) and have an interest rate of 6% for a thirty year period. These pools are then sold to a bond dealer in the form of a GNMA certificate. These in turn are sold to investors and the bond dealer pays (in this example) 5.5% interest. Meanwhile the original lender continues to receive payments from the mortgagors and passes on these to the bond holders.
• The profits of Ginnie Mae usually come in the shape of a guarantee fee and a servicing fee. The guarantee fee is for securing and making payments in case the home owner defaults on a payment. The servicing fee is for dealing with the homeowner and collecting the monthly payments from the homeowner. In its 2003 annual report, Ginnie Mae reported that it had guaranteed securities for over 30 million homes worth over $2 trillion.

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