Who issues mortgage securities?

The majority of mortgage securities are issued and/or guaranteed by an agency of the U.S. government, the Government National Mortgage Association (Ginnie Mae), or by government-sponsored enterprises (GSEs) such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Ginnie Mae is a government-owned corporation within the Department of Housing and Urban Development. Fannie Mae and Freddie Mac are chartered by Congress, but owned by stockholders.

Mortgage Securities

Mortgage securities represent an ownership interest in mortgage loans made by financial institutions (savings and loans, commercial banks or mortgage companies) to finance the borrower’s purchase of a home or other real estate. Mortgage securities are created when these loans are packaged, or “pooled,” by issuers or servicers for sale to investors. As the underlying mortgage loans are paid off by the homeowners, the investors receive payments of interest and principal.

Investors may purchase mortgage securities when they are issued or afterward in the secondary market. Investments in mortgage securities are typically made by large institutions when the securities are issued. These securities may ultimately be redistributed by dealers in the secondary market.

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