Is Ginnie The New Fannie?

The Wall Street Journal has an interesting opinion piece about Ginnie Mae, technically known as the Government National Mortgage Association. Although a traditionally a lesser talked-about government agency that backs mortgages, it has been growing. That might not be great news for taxpayers.

The WSJ says:

Only last week, Ginnie announced that it issued a monthly record of $43 billion in mortgage-backed securities in June. Ginnie Mae President Joseph Murin sounded almost giddy as he cheered this "phenomenal growth." Ginnie Mae's mortgage exposure is expected to top $1 trillion by the end of next year--or far more than double the dollar amount of 2007.

And here's a chart showing that growth:

ginnie chart.gif

Some believe it's prudent to shrink the size of Fannie Mae and Freddie Mac -- the two better-known mortgage purchasers that the government was forced to place into conservatorship last year due to huge losses. In the meantime, Ginnie is growing by leaps and bounds. According to the WSJ piece, it's also taking on those nasty subprime mortgages that are blamed for the financial crisis.

Ginnie has also traditionally been different from Fannie and Freddie in that Ginnie's government guarantee has always been explicit, while Fannie's and Freddie's were only implicit until recently. So if something goes wrong with Ginnie, taxpayers are definitely on the hook.

If you think that the government should be in the business of guaranteeing mortgages, then the recent growth of Ginnie should please you. If not, then you have something new to worry about.