What is a GNMA (Ginnie Mae)? | IRS Definition of a GNMA (Ginnie Mae)

GNMA, known often as Ginnie Mae, is the Government National Mortgage Association. Established in the 1960s, GNMA makes it possible for mortgages to be resold on a secondary market. In doing so, it encourages lending, and boosts the rate of American homeownership. In the past, this has led to some economic issues, as large numbers of foreclosures could hit the secondary market and affect other areas of economic strength.

GNMA, unlike FNMA (Fannie Mae) and FHLMC (Freddie Mac) is owned by the government rather than just being sponsored by the government. When lenders are able to sell their loans on the secondary market, they’re also able to make additional loans with that money. Consequently, in a healthy economy, this provides greater leverage, but in an unhealthy economy it can mean that banks may potentially overextend themselves to the point of danger.