Government National Mortgage Association

The Government National Mortgage Association (GNMA, also known as Ginnie Mae) was created by the United States Federal Government through a 1968 partition of the Federal National Mortgage Association. The GNMA is a wholly owned corporation within the United States ' Department of Housing and Urban Development (HUD). Its main purpose is to provide financial assistance to low- to moderate-income homebuyers, by promoting mortgage credit.

Business

The GNMA, along with the other so-called Government Sponsored Enterprises (GSEs), sell mortgages in the secondary market. This lets investors put money in the mortgage securities market, which increases the price of the mortgage bonds and lowers their rates, which in turn lowers the rates on mortgages in the primary market so that more people are able to buy and mortgage a home. The GNMA does this by guaranteeing the timely payment of the principal and interest payments on mortgage-backed securities.

There are several types of GNMA securities that are active in the institutional fixed income markets:

* GNMA I securities. A GNMA I (the "I" is a Roman numeral one) represents a pool of mortgages all issued by one issuer, all with the same interest rate, and all issued at around the same time (within a few months).

* GNMA II securities. A GNMA II is similar to a GNMA I, except that the mortgages can have a range of interest rates, and can include mortgages issued by more than one issuer. In this case, the service fees (see below) vary, so that the new interest rate being paid to the investor from each mortgage is the same.

* GNMA "REMIC" securities. A REMIC (Real Estate Mortgage Investment Conduit) is an additional level of securitization. The collateral pool for a REMIC consists not of mortgages, but of mortgage-backed securities (such as GNMA I, GNMA II, or previously issued REMICs).

Pools are created by lenders. For example, a mortgage lender may sign up 100 home mortgages in which each buyer agreed to pay a fixed interest rate of 6% for a 30-year term. The lender (who must be an approved issuer of GNMA certificates) obtains a guarantee from the GNMA and then sells the entire pool of mortgages to a bond dealer in the form of a "GNMA certificate". The bond dealer then sells GNMA mortgage-backed securities, paying 5.5% in this case, and backed by these mortgages, to investors. The original lender continues to collect payments from the home buyers, and forwards the money to a paying agent who pays the holders of the bonds. As these payments come in, the paying agent pays the principal which the home owners pay (or the amount that they are scheduled to pay, if some home owners fail to make the scheduled payment), and the 5.5% bond coupon payments to the investors. The difference between the 6% interest rate paid by the home owner and the 5.5% interest rate received by the investors consists of two components. Part of it is a guarantee fee (which GNMA gets) and part is a "servicing" fee, meaning a fee for collecting the monthly payments and dealing with the homeowner. If a home buyer defaults on payments, GNMA pays the bond coupon, as well as the scheduled principal payment each month, until the property is foreclosed. If (as is often the case) there is a shortfall (meaning a loss) after a foreclosure, GNMA still makes a full payment to the investor. If a home buyer prematurely pays off all or part of his loan, that portion of the bond is retired, or "called", the investor is paid accordingly, and no longer earns interest on that proportion of his bond.

The arrangement seemingly benefits everyone involved:

* The mortgage lender has offloaded all risk to the GNMA, and has very quickly received a reimbursement of the money lent to home buyers from the bond dealer, and can immediately use this money to offer another pool of loans to the public.

* The home-buying public benefits from lower mortgage rates caused by the large amount of lender competition, in turn caused by a large supply of lenders, which is enabled by this quick reimbursement of money.

* The lower-income home-buying public benefits from a greater willingness by lenders to risk making loans to that group.

* The investors, whose money makes all of this work in the first place, benefit from the "full faith and credit" of the United States government; GNMA bonds are backed by the pool of mortgages, and even if massive defaults were to occur, the U.S. government would make good on all payments. GNMA bonds also feature higher returns than other U.S. government issued bonds.

GNMA bonds themselves are considered risk-free from the standpoint of total default, but they are subject to risks that all other bonds have, including interest rate risk. They also have the undesirable attribute of being callable every month, meaning that, unlike other bonds, all or part of a GNMA bond might suddenly "mature" next month, if all the homeowners decided to pay off or refinance their mortgages. This does not involve a risk of loss to the investor, but rather a premature payment of the principal, and now the investor has to go look for another investment for his money. This is called prepayment risk. As a practical matter, many institutional investors find it very inconvenient to own bonds which get small principal payments every month.

The GNMA said in its 2003 annual report that over its history, it had guaranteed securities on the mortgages for over 30 million homes totaling over $2 trillion. It guaranteed $215.8 billion in these securities for the purchase or refinance of 2.4 million homes in 2003.

 

 

 

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Gulf Shores and Orange Beach Area Info

Climate
The Gulf Coast Area has a mild climate with an average annual temperature of 67.4 degrees. The average temperature in January is 51.4 degrees. The average temperature in July is 81.8 degrees. The average annual precipitation is 67 inches, and the growing season is 292 days.

Education
Education is a fundamental block in building a bright future. The Gulf Coast Area opened a brand new high school during 1999 in Gulf Shores (ph. 251.968.4747). The area has two elementary schools; they are Gulf Shores Elementary (ph. 251.968.7375) and Orange Beach Elementary (ph. 251.981.5662). Gulf Shores Middle School (ph. 251.968.8719) offers an excellent curriculum in preparation for high school. All public schools are part of the Baldwin County school system. If you are interested in private education, you also have the option of Bayside Academy (ph. 251.955.5211), which includes age 3yrs – Grade 4.

Healthcare
The nearest hospital is South Baldwin Regional Medical Center (ph. 800.580.3627) located in Foley. South Baldwin Medical Center offers 24-hour emergency services (ph. 251.952.3400). Numerous medical professionals practice in the area providing both family practice and specialized care.

Airports
Corporate and Private air service is available in Gulf Shores from the Jack Edwards Municipal Airport, with a full Instrument Landing System and the longest paved runway being 7000 feet. The closest commercial air service is available in Pensacola, roughly 30 miles away, at the Pensacola Regional Airport (ph. 850.435.1746). Major carriers serving the airport are Continental, US Airways, Delta, Northwest, and American. Other commercial airports are located in Mobile (ph. 251.633.0313) and Gulf Port, Mississippi (ph. 228.863.5951).

Shopping
The area offers many shops ranging from casual apparel and beachwear to upscale fashion and specialty boutiques. If you are a bargain hunter, you can find 120 factory outlet stores in Foley.

Parks and Recreation
The nearest state park is the Gulf State Park (ph. 251.948.7275). The 6,000-acre park area offers campsites, picnic areas, 18-hole golf course, 825 foot fishing pier, 144 room hotel and convention center. Other parks in the area include Bon Secour Wildlife Refuge (ph. 251.540.7720), Meyer Park (ph. 251.968.4420), Johnnie Sims Park and Kids Park (ph. 251.968.4420), and Wade Ward Nature Park (ph. 251.968.4420).

State/Local Income Tax
For detailed information about Alabama income tax, contact the Alabama Department of Revenue, Individual and Corporate Tax Division (ph. 251.242.1000). In most instances, local governments in Alabama do not levy city, town, or county income taxes.

Property Taxes
Property (Ad Valorem) taxes are taxes on real business and/or personal property. “Ad Valorem” means “according to value”. For details, call the Revenue Commissioner’s office (ph. 251.943.5061, ext. 2840).