If you plan on purchasing a home, you will likely take out a home mortgage. Since your monthly mortgage payment is a combination of four charges bundled into one, it’s essential to understand each element of your overall payment and how it can fluctuate over time. Using the acronym P.I.T.I. can help you remember.
What is Ginnie Mae?
Ginnie Mae, or the Government National Mortgage Association, is a corporation inside the U.S. Department of Housing and Urban Development. It was originally founded as the Federal National Mortgage Association before being split into Fannie Mae and Ginnie Mae in 1968. Ginnie Mae’s responsibility is to support the market for the following loans:
Ginnie Mae & GSEs
Ginnie Mae is not a government sponsored enterprise like Freddie Mac and Fannie Mae in that:
- It’s openly backed by the U.S. government with an explicit guarantee of on-time payment.
- It’s a self-sustaining corporation run entirely by the government and is not owned by shareholders.
- It doesn’t purchase mortgage loans for profit, but insures the payment of principal and interest to approved issuers, or lender.
- It doesn’t have a financial obligation to mortgage backed security investors in the secondary market unless their issuers file for bankruptcy.
In order to get the benefits of Ginnie Mae, you must be an approved lender.
Ginnie Mae, Lenders & Consumers
Ginnie Mae does not work directly with consumers because it is not a lending institution. Rather, Ginnie Mae works with lending institutions like banks and mortgage companies.
So, as a borrower, if your mortgage is sold to another company, Ginnie Mae has no involvement in the process. It merely insures the security of the mortgage with the loan as collateral. If you are advised that Ginnie Mae can resolve any issues concerning a sold mortgage, know that that is not the case. If you run into issues with your mortgage after it is sold, work with your mortgage provider to resolve the problem.
For lenders, Ginnie Mae guarantees that they will be paid on time, even during times of hardship. This guarantee is good for lenders in that they can continue issuing mortgages to qualified borrowers and keep interest rates low.