Question

Which of the following statements about GNMA is/are true? I. GNMA provides timing insurance. II. GNMA creates pools of mortgages and issues securities. III. GNMA insures only FHA, VA, and FmHA loans. IV. GNMA requires that all mortgages in the pool have the same interest rate. "

Answer 1

Answer:

I. GNMA provides timing insurance. II. GNMA creates pools of mortgages and issues securities. III. GNMA insures only FHA, VA, and FmHA loans. IV. GNMA requires that all mortgages in the pool have the same interest rate. "

Explanation:

The Government National Mortgage Association or better known as the GNMA, is a U.S government corporation that helps and guarantees a timely payment of principal and interest on mortgage-backed securities. The GNMA works different than the mortgage market. It doesn’t sell or buy pass-through mortgage-backed securities and neither purchase mortgage loans. Instead, private lending institutions approved the GNMA to originate loans, pooling them into securities, and issue mortgage-backed securities that are guaranteed by the GNMA. In consequence, this guarantees the timely payment of principal and interest from approved issuers. Most mortgages securitized by the GNMA are insured by the Federal Housing Administration (FHA), Veterans Administration (VA) and the Rural Housing Administration (RHA). Finally, the GNMA Guide establishes that “Each mortgage in a pool must bear the same fixed interest rate as every other mortgage in its pool. The interest rate on the mortgage may not change during the life of the mortgage”.