Ginnie Mae Mortgage Backed Securities Outline: Analysis
Ginnie mae is involved in the mortgage backed securities investment of mortgage loans. Ginnie Mae is involved in benefiting from the pooling of mortgage loans in investment trusts, Ginnie Mae has also been involved with fraud with the bonds. Ginnie Mae is an investor on the loan audited in this report.
Fraud involving Ginnie Mae
Excerpt from Article:
“The Securities and Exchange Commission is offering a reward to the whistleblower that revealed a scheme at First Mortgage Corporation that involved several of the company’s senior executives lying about the performance of the mortgages the company originated, re-securitizing them, and defrauding investors out of $7.5 million – if in fact there is one.
Earlier this year, the SEC fined First Mortgage and the company’s chairman and CEO, president, and chief financial officer, and other executives a total of $12.7 million for pulling current, performing loans out of Ginnie Mae mortgage bonds by falsely claiming the mortgages were delinquent in order to sell them at a profit into newly-issued residential mortgage-backed securities.”
“Government National Mortgage Association (Ginnie Mae)
Ginnie Mae I Mortgage Backed Securities
Expands affordable housing in America by linking global capital markets to the nation’s housing market.
Nature of Program: Ginnie Mae guarantees investors (security holders) the timely payment of principal and interest on securities issued by private lenders that are backed by pools of Federal Housing Administration (FHA), Veterans Affairs (VA), Rural Housing Service (RHS), and Public and Indian Housing (PIH) mortgage loans. The full faith and credit guarantee of the U.S. Government that Ginnie Mae places on mortgage-backed securities lowers the cost of, and maintains the supply of, mortgage financing for government-backed loans.
In the Ginnie Mae I program, all mortgages in a pool are fixed-rate, single-family mortgages with the same interest rate. The mortgage interest rates must all be the same, and the same lender must issue the securities. With the exception of Ginnie Mae I pools that are used as collateral for state or local bond financing programs (BFP) for which Ginnie Mae provides special consideration, Ginnie Mae I securities have a servicing and guarantee fee that totals 50 basis points, and the minimum pool size is $1 million.
To issue a Ginnie Mae I security, an approved lender applies for a commitment from Ginnie Mae for the guaranty of securities. The lender originates or acquires mortgage loans and assembles them into a pool of mortgages. The Ginnie Mae I program permits lenders to issue securities backed by pools of single family, multifamily, and manufactured housing loans where the interest rate is the same for each loan in the pool. The lender decides to whom to sell the security and then submits the documents to Ginnie Mae’s pool processing agent. The agent prepares and delivers the Ginnie Mae guaranteed security to the investors designated by the lender. The lender is responsible for selling the securities and servicing the underlying mortgages. Issuers of Ginnie Mae I securities are also responsible for paying security holders on the 15th day of each month.
Applicant Eligibility: A firm must be approved as an issuer based on capital requirements, staffing, experience criteria, and infrastructure. The firm must also be an FHA-approved lender in good standing.
Legal Authority: Section 306(g) of the National Housing Act (12 U.S.C. 1721(g)).
Administering Office: Ginnie Mae, U.S. Department of Housing and Urban Development, Washington, DC20410-9000.
Information Sources: Administering office; Office of Mortgage-Backed Securities. On the Web
Current Status: Active.”
Securitization General Diagram: