Although it is often stated that Ginnie Mae issues mortgage-backed securities, why is that technically incorrect?
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Ginnie Mae is a federally related institution because it is part of the Department of Housing and Urban Development. As a result, the pass-through securities that it guarantees carry the full faith and credit of the U.S. government with respect to timely payment of both interest and principal. However, it is not technically correct to say that Ginnie Mae is an issuer of pass-through securities. Ginnie Mae provides the guarantee, but it is not the issuer. Pass-through securities that carry its guarantee and bear its name are issued by lenders it approves, such as thrifts, commercial banks, and mortgage bankers. Thus, these approved entities are referred to as the "issuers."
There are two MBS programs through which securities are issued: Ginnie Mae I program and Ginnie Mae II program. In the Ginnie Mae I program, pass-through securities are issued that are backed by single-family or multifamily loans; in the Ginnie Mae II program, single-family loans are included in the loan pool. While the programs are similar, there are differences in addition to the obvious one that the Ginnie Mae I program may include loans for multifamily houses, whereas the Ginnie Mae II program only has single-family housing loans.
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