Want to buy some nice mortgage-backed securities? Probably not, these days, unless you’re a speculator bottom-fishing for discount deals.
But what if the mortgage bonds were backed by the government, as U.S. Treasury bonds are? What if Uncle Sam stepped in to pay the principal and interest to investors if one of the home loans backing the security went into default?
That would create -- and has created -- a boom time at the Government National Mortgage Assn. The agency, better known as Ginnie Mae, generates mortgage-backed securities from loans insured or guaranteed by the Federal Housing Administration and the Department of Veterans Affairs.
Ginnie Mae said Monday that it issued $43.5 billion in mortgage-backed securities in June, the first time the $40-billion barrier was broken. For the first six months of 2009, Ginnie Mae securities topped $206 billion, nearly double the amount in the same period last year.
In a news release, Ginnie Mae President Joseph Murin said: “Ginnie Mae’s ability to provide a safe security for investors and critical liquidity for issuers is why the corporation was created more than 40 years ago.”
The Mortgage Bankers Assn. reported last week that FHA and VA loans represented 35.9% of new mortgage applications in June, the highest level since November 1990. In August 2005, just 6.8% of mortgage applications were for these federally backed loans.
Ginnie Mae, which is part of the Department of Housing and Urban Development, was set up to bolster the housing market. That role is similar to the ones played by Freddie Mac and Fannie Mae -- except, unlike those wobbly mortgage giants, which have been taken over by the government, Ginnie Mae was never publicly traded.
The contrast between government-guaranteed Ginnie Maes and private mortgage securities was underscored Monday by a report from Fitch Ratings. Fitch said delinquencies on securities backed by commercial loans jumped by $2.2 billion in June, a record.