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GNMA Stands Apart

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When you hear the names Fannie Mae and Freddie Mac or the term mortgage-backed securities, you don’t get a warm and fuzzy feeling, do you? Peace of mind and comfort don’t roll off of the tongue either. But some mortgage-backed securities do make sense. So what separates fish from fowl? Four letters: GNMA.

“GNMA is the only mortgage-backed security that enjoys the full faith and credit of the United States Government,” reads the website. As you can see on the chart below, the spread between yields on 30-year GNMA mortgages and 30-year Fannie Mae mortgages averages about 8 basis points, or 0.08%. But the GNMA mortgages are explicitly backed by the full faith and credit of the U.S. government. You should check out the website to learn more, but I’ll leave you with this little tidbit: “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.”

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.