Ginnie Mae (GNMA), Student loan Marketing Association (Sallie Mae)

The income from Ginnie Maes, which are pass-through certificates, comes from a pool of mortgage payments. Mortgage holders pay their monthly mortgage to the institution, usually a bank, that originated the loan. The bank then deducts a small percentage, about �%, and passes the rest to the Ginnie Mae investors. Payments are guaranteed by Ginnie Mae. The mortgages are FHA insured, or guaranteed by the VA or the Farmers Home Administration. The monthly payments consist of principal and interest, have a minimum denomination of $25,000 and are backed by the federal government. Earned interest is taxed. There are 2 types of Ginnie Maes:

Ginnie Mae does not buy or sell loans or issue mortgage-backed securities (MBS). Therefore, Ginnie Mae's balance sheet doesn't use derivatives to hedge or carry long term debt.

Breakout of Ginnie Mae Issuers by Institution Type Pie Chart

What Ginnie Mae does is guarantee investors the timely payment of principal and interest on MBS backed by federally insured or guaranteed loans � mainly loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Other guarantors or issuers of loans eligible as collateral for Ginnie Mae MBS include the Department of Agriculture's Rural Housing Service (RHS) and the Department of Housing and Urban Development's Office of Public and Indian Housing (PIH). The interest rate of the security is lower than the interest rate of the underlying loan to allow for payment of servicing and guaranty fees. Ginnie Mae MBS are created when eligible mortgage loans (those insured or guaranteed by FHA, the VA, RHS, or PIH) are pooled by approved issuers and securitized. Ginnie Mae MBS investors receive a pro rata share of the resulting cash flows (after subtracting servicing and guaranty fees). Ginnie Mae I MBS requires all mortgages in a pool to be the same type (e.g. single-family) and have a first payment date no more than 48 months before the issue date of the securities. Each mortgage must be, and must remain, insured or guaranteed by FHA, VA, RHS or PIH. In addition, the mortgage interest rates must all be the same and the mortgages must be issued by the same issuer. The minimum pool size is $1 million; payments on Ginnie Mae I MBS have a stated 14-day delay (payment is made on the 15th day of each month). Ginnie Mae II MBS allows multiple-issuer pools to be assembled, which in turn allows for larger and more geographically dispersed pools as well as the securitization of smaller portfolios. A wider range of coupons is permitted in a Ginnie Mae II MBS pool, and issuers are permitted to take greater servicing fees � ranging from 25 to 75 basis points. The minimum pool size is $250,000 for multi-lender pools and $1 million for single-lender pools. Ginnie Mae II MBS have an additional five-day payment delay because issuer payments are consolidated by a central paying agent (payment is made on the 20th day of each month).

Ginnie Mae Platinum Securities provide investors with greater operating efficiency, allowing holders of multiple MBS to combine them into a single platinum certificate. Ginnie Mae Platinum Securities can be used in structured finance transactions, repurchased transactions as well as general trading.

Real Estate Mortgage Investment Conduits (REMIC) can be corporations, partnerships, or trusts that issue mortgage-backed securities of different classes, with different principal balances, interest rates, average lives, prepayment characteristics, final maturities, different yields and different risks, thus expanding the market by creating a more diverse set of securities for investors. The legal basis of REMICs was established by the Tax Reform Act of 1986, which eliminated double taxation from these securities. Unlike traditional pass-throughs, the principal and interest payments in REMICs are not passed through to investors pro rata; instead, they are divided into varying payment streams to create the different classes. The assets underlying REMIC securities can be either other MBS or whole mortgage loans.

Student Loan Marketing Association (Sallie Mae)

Sallie Mae was originally created in 1972 as a government-sponsored entity (GSE). The company began privatizing its operations in 1997, a process it completed at the end of 2004 when the company terminated its corporate ties to the federal government. Its shares trade on the New York Stock Exchange. Sallie Mae provides liquidity for private lenders participating in the federal Guaranteed Student Loan Program, supplemental programs, the Health Education Assistance Loan Program or the PLUS loan program for parents of undergraduates.

Sallie Mae issues unsecured debt as discount notes, floating-rate notes, long-term fixed-rate securities, and zero coupon bonds. The interest is exempt from state and local taxes.

The company primarily provides federally guaranteed student loans originated under the Federal Family Education Loan Program (FFELP), and offers comprehensive information and resources to assist students, parents and guidance professionals with the financial aid process. Sallie Mae currently owns or manages student loans for 8 million borrowers.
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Ginnie Mae (GNMA) and the Student loan Marketing Association (Sallie Mae)

Government National Mortgage Association (GNMA) or Ginnie Mae Pass-Through

Student Loan Marketing Association (Sallie Mae)