There is another important player in the mortgage-backed securities world—the Government National Mortgage Association, more commonly known as Ginnie Mae. Unlike Freddie Mac and Fannie Mae, Ginnie Mae is not a GSE; instead, it is a public government agency. It does not buy or sell mortgages or issue mortgage-backed securities. Instead, Ginnie Mae securities are often issued by private companies, such as banks. Ginnie Mae guarantees the timely payment of interest and principal of certain mortgage-backed securities, and it has the full faith and credit of the U.S. federal government to do so. So if an exam question describes an investor who buys a Ginnie Mae mortgage-backed security, remember that the investor is buying a security with interest and principal payments that are backed by the full faith and credit of the U.S. government. Despite their differences, mortgage-backed securities issued by Fannie Mae and Freddie Mac and those backed by Ginnie Mae are all referred to as agency securities.
SUMMARY TABLE
Issuers of Agency Securities
Backing
Type of Entity
Function
Purpose of Entity
* mortgage-backed securities
† collateralized mortgage obligations
Freddie Mac
Implied guarantee from federal government
Government-sponsored enterprise
Issues MBSs* and CMOs†
Bring more funds into the housing sector to encourage home ownership
