Do HUD/FHA 221(d)(4) loans qualify for Ginnie Mae securities?

HUD/FHA 221(d)(4) Loans and Ginnie Mae Securities 

The Government National Mortgage Association, otherwise known as Ginnie Mae, issues mortgage-backed securities which are "backed by the full credit and faith of the U.S. government." These are based on loans including a variety of FHA multifamily loans. These include FHA multifamily construction loans, like the HUD 221(d)(4) loan, as well as loans issued by the Department of Veterans Affairs (VA). 

What is GNMA?

In 1968, HUD set up the Government National Mortgage Association (GNMA or Ginnie Mae) to promote home ownership in the US. In general, Ginnie Mae has several major functions:

  • Guarantees timely payment of principal and interest payments on residential MBS (mortgage-backed security) instruments to institutional investors

  • Guarantees securities backed by single-family and multifamily loans insured by government agencies (FHA, VA, HUD’s Office of Public and Indian Housing, and the Department of Agriculture’s Rural Development)

Additionally, Ginnie Mae does not:

  • Originate or purchase mortgage loans

  • Purchase, sell, or issue securities

  • Use derivatives to hedge

  • Carry long-term debt or other outstanding securities liabilities

What are Mortgage-Backed Securities? 

Mortgage-backed securities (MBS) like Ginnie Mae bonds, are an investment in a pool of mortgage loans. These are bought by investors, who receive a certain amount of the principal and interest throughout the life of the bond, in this case, usually around 30 years. They also take on a certain degree of risk, even though the investment is backed by the U.S. government. Right now, investors can buy Ginnie Mae bonds in minimum $25,000 denominations. 

To learn more about HUD 221(d)(4) loans, fill out the form below and an HUD mortgage specialist will get in touch.