Ginnie Mae's New Role Spurs Concerns

Wall Street Journal (08/15/08) P. A16; Holzer, Jessica
Ginnie Mae has seen its business mushroom in the last year but has stretched itself thin by keeping its payroll at just over 60. Though the government-sponsored enterprise has endured the strain well to date, Wall Street insiders increasingly fret that it will be in over its head when it soon takes on an even bigger role due to a federal law that makes government programs the main antidote for the struggling residential property market. About 97 percent of FHA loans are packaged into Ginnie Mae securities and sold to investors, with Ginnie Mae guaranteeing the timely payment of principal and interest on the loans. This guarantee makes these products popular with investors, as issuance of Ginnie Mae mortgage-backed securities topped $27 billion in June and $26 billion the following month--more than three times the volume for the same period a year earlier.