The Pioneer of Mortgage-Backed Securities
In its earliest days, housing finance was a fragmented, inefficient and illiquid market, with mortgage rates varying considerably from region to region, and some locations having practically no funds available at all. This was a direct consequence of the near impossibility of selling individual mortgages on the secondary market. Lending institutions would issue a mortgage, collect payments, and file the mortgage away until the principal was paid off. The problem: a lack of available, consistently priced capital put a ceiling on the number of new mortgages that could be issued.
Ginnie Mae solved this problem and revolutionized the American housing industry in 1970 by pioneering the issuance of mortgage-backed securities.
Today, lenders pool packages of qualifying FHA, VA, RHS or PIH mortgages and convert them into securities. Ginnie Mae guarantees investors the timely payment of principal and interest on these securities.
In a single step, the issuance of Ginnie Mae mortgage-backed securities converts individual mortgages into safe, liquid securities for investors around the world. Ginnie Mae thus helps channel global capital into American housing markets, helping make more mortgages available.