Ginnie Mae Pass Through

Ginnie Mae may sound like the name of your eccentric aunt who lives in a school bus she converted into a mobile home and travels from commune to commune selling hand-woven yoga mats. But it's actually the nickname for a government agency, with the official, more imposing name of Government National Mortgage Association.

Part of the Department of Housing and Urban Development, Ginnie Mae's stated mission is to promote home ownership. It does this by backing housing loans that might otherwise get turned down by banks.

The process involves buying mortgages originated by government agencies that help targeted groups (like the Federal Housing Administration and the Rural Housing Service) and bundling them together into securities it issues to public markets. These are fundamentally mortgage-backed securities, but unlike the kind that contributed to the financial crisis of 2007/2008, the ones issued through Ginnie Mae have the backing of the government.

Ginnie Mae guarentees payment of the securities, whether the homeowners whose mortgages make up the securities end up paying their loans back or not. These pass-throughs, as they are called, are considered safe investments, which pay higher rates than treasuries. Because the Ginnie Mae bonds are backed by the full faith and credit of the government, they offer lower risk than other mortgage-backed securities.