Legal Definitions - GNMA

Definition: GNMA stands for Government National Mortgage Association. It is a government-owned corporation that guarantees mortgage-backed securities issued by approved lenders.

Example: Let's say a borrower takes out a mortgage from a bank. The bank can then sell that mortgage to an approved GNMA issuer, who will pool it with other mortgages and issue mortgage-backed securities to investors. GNMA guarantees the timely payment of principal and interest on these securities, making them a safer investment for buyers.

Explanation: GNMA helps to make the mortgage market more efficient by providing a guarantee to investors. This allows lenders to sell mortgages and use the proceeds to make more loans, which helps to increase homeownership. The example shows how GNMA works by providing a guarantee to investors who buy mortgage-backed securities, which in turn helps to provide funding for more mortgages.