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Simple English definitions for legal terms
Government National Mortgage Association
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A quick definition of Government National Mortgage Association:
Government National Mortgage Association (GNMA or Ginnie Mae) is a government-owned organization that guarantees mortgage-backed securities made up of loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). GNMA buys residential mortgages from local lenders and issues federally insured securities backed by these mortgages. This helps to make more money available for home loans and helps to keep interest rates low for borrowers.
A more thorough explanation:
The Government National Mortgage Association (GNMA), also known as Ginnie Mae, is a government-owned corporation that operates under the U.S. Department of Housing and Urban Development. Its primary responsibility is to guarantee mortgage-backed securities that are composed of FHA-insured or VA-guaranteed mortgage loans.
GNMA purchases residential mortgages from local lenders on the secondary market and issues federally insured securities backed by these mortgages. This helps to provide liquidity to the mortgage market and makes it easier for lenders to offer mortgages to homebuyers.
Let's say a local lender originates a mortgage for a homebuyer. The lender can then sell that mortgage to GNMA on the secondary market. GNMA will then issue a security backed by that mortgage, which can be sold to investors. This provides the lender with cash to make more mortgages, while also providing investors with a safe and secure investment.
Another example would be if a veteran applies for a VA-guaranteed mortgage. The lender can sell that mortgage to GNMA, which will issue a security backed by that mortgage. This helps to ensure that veterans have access to affordable mortgage financing.
Overall, GNMA plays an important role in the mortgage market by providing liquidity and making it easier for lenders to offer mortgages to homebuyers.