GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
The Government National Mortgage Associa-
tion (GNMA), also known as Ginnie Mae, is a
corporation wholly owned by the federal gov-
ernment. Created by the Housing and Urban
Development Act of 1968, 825 Stat. 491, GNMA
is designed to support the federal government’s
housing programs by establishing a secondary
market for the sale and purchase of residential
mortgages.
During the late 1960s, the federal govern-
ment expressed concern that available credit for
low-income housing was insufficient to meet the
growing demand. In response GNMA began
issuing certificates to obtain additional funds for
government-backed, low-income mortgages.
GNMA certificates entitle their holders to
receive a portion of the income derived from a
residential mortgage pool approved by the gov-
ernment.
A residential mortgage pool consists of a
group of mortgages that are issued by private
lenders, including commercial banks and sav-
ings and loan institutions. The mortgages in this
group have similar terms and interest rates. If
the pool is approved by GNMA, it is placed into
a trust, from which it is sold to investors by
SECURITIES dealers. Some pools include more
than one thousand residential mortgages.
The revenue generated by the sale of these
pools helps make additional credit available for
low-income residential mortgages insured by
government agencies such as the Federal Hous-
ing Administration (FHA), the VETERANS
ADMINISTRATION (VA), and the Farmers Home
Administration. The HOUSING AND URBAN
DEVELOPMENT DEPARTMENT, which is respon-
sible for administering GNMA, oversees the
entire program.
GNMA mortgage pools are considered sta-
ble investments by securities dealers and
investors alike. The timely payment of principal
and interest on each mortgage is guaranteed by
GNMA and the FULL FAITH AND CREDIT of the
federal government. GNMA enjoys unlimited
authority to borrow funds from the U.S. Trea-
sury in order to make good on this guarantee.
By developing a stable and viable secondary
market for government-backed residential
mortgages, GNMA has originated more than $1
trillion in securities trading. The revenue gener-
ated through this secondary market has enabled
more than 19 million low-income families to
purchase homes and provided the U.S. Treasury
with annual receipts sometimes exceeding $400
million.
In 1994 President BILL CLINTON outlined
the National Homeowners Strategy, which
spurred GNMA to undertake an intense and
sweeping review of its practices and programs.
In addition, GNMA has been working to satisfy
internal mandates that require it to enhance its
