Decoder: Meet Ginnie Mae

Ginnie Mae logo

TEXT OF STORY

Kai Ryssdal: Ginnie Mae, the Government National Mortgage Association, said today it issued a record $34.5 billion in mortgage-backed securities last month. Not bad for a far less well-known sibling. Ginnie comes from the same family as two other companies we've gotten to know pretty well over the last year. That would be Fannie Mae and Freddie Mac. They're the government-backed companies that are behind a huge percentage of the mortgages in this country. And who were, it should be said, recipients of a large chunk of bailout money last fall. So, how does Ginnie fit into that family? Marketplace's Nancy Marshall Genzer has the answer in the latest installment of The Marketplace Decoder.


NANCY MARSHALL GENZER:

RICO GAGLIANO: She's a bit of a wallflower. Wears sensible shoes. She's more stable than her siblings, Fannie and Freddie, but was never as popular. And she has a face only an economist could love. Meet Ginne Mae.

OK, so maybe Ginnie Mae wouldn't make it as a contestant on the Dating Game. But economists do love her.

ALAN MENDELOWTIZ: She has a good personality.

Allan Mendelowitz heads the Federal Housing Finance Board. He says a good personality boils down to one thing: stability. And Ginnie Mae has it in spades. She didn't go through the partial privatization process that Fannie Mae and Freddie Mac did. Ginnie is part of the Department of Housing and Urban Development. And Ginnie only deals with conventional mortgages issued by government agencies, like the Federal Housing Administration and Veterans Administration. Ginnie guarantees these mortgages. And she's backed by her favorite uncle -- Uncle Sam.

MENDELOWITZ: If you have a Ginnie Mae guarantee, you have a full faith and credit guarantee of the federal government.

Investors like Ginnie's conservative bent. Three years ago, at the height of the subprime craziness, she guaranteed less than 5 percent of mortgage-backed securities At the end of last year, that number zoomed up to 35 percent. She's now neck-and-neck with Fannie and Freddie.

But Ginnie is still very picky about the loans she backs. She's now popular enough to be included in President Obama's foreclosure prevention plan. New White House guidelines for loan modifications will apply to most Ginnie-backed mortgages. And if there are foreclosures, investors in Ginnie's mortgage-backed securities still get paid. And guess who might be remade in Ginnie's image?

BERT ELY: When folks talk about nationalizing Fannie and Freddie it is quite possible that they'll be restructured in a way that would be very much like the Ginnie Mae structure.

And, banking consultant Bert Ely says, eventually, Fannie and Freddie could be folded into Ginnie Mae. As an amped-up federal agency, Ginnie could forget about being a contestant. She'd be a player.

In Washington, I'm Nancy Marshall Genzer for Marketplace.

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