Fannie/Freddie shutdown and GNMA funds

[steelyman]

There was an article published in the New York Times on March 3 entitled "Without Loan Giants, 30-Year Mortgage May Fade Away". The primary topic was possibilities of changes if Fannie and Freddie were shut down:

http://www.nytimes.com/2011/03/04/bu...1&ref=business

I wonder what effect this might have on GNMA funds, which are held by many people (including me). Do they disappear?

[thefinancebuff]

GNMA guarantees FHA and VA loans. It's unrelated to Fannie and Freddie. I don't see why it would disappear.

[steelyman]

Quote:

Originally Posted by thefinancebuff GNMA guarantees FHA and VA loans. It's unrelated to Fannie and Freddie. I don't see why it would disappear.

A piece of information I did not know. Which is why I ask the question on these boards.

Thanks - hopefully this means those funds are insulated.

[MissMolly]

Actually, GNMA buys the loans that are insured/guaranteed by FHA and VA. GNMA doesn't actually guarantee anything. If the loan goes into foreclosure, GNMA requires the loan servicer to repurchase the loan. The foreclosure is completed and a claim filed with FHA or VA for the balance due.

[clifp]

Quote:

Originally Posted by MissMolly Actually, GNMA buys the loans that are insured/guaranteed by FHA and VA. GNMA doesn't actually guarantee anything. If the loan goes into foreclosure, GNMA requires the loan servicer to repurchase the loan. The foreclosure is completed and a claim filed with FHA or VA for the balance due.

Learn something new everyday, I always wondered why GNMA funds were considered so safe. Nice to have a former banker on the boards, a belated welcome MissMolly.

[MissMolly]

Thanks! I can't really claim the title of banker, however. I was a mortgage loan servicer for 30 years. Only worked in mortgage companies.

[steelyman]

Great and timely responses to my initial question, thank you all. We certainly have a lot of accumulated knowledge on these forums! A great place to participate and learn.