It does that through guaranteeing to investors the on-time payment of mortgage-backed securities (MBS) even if homeowners default on the underlying mortgages and the homes are foreclosed upon.

One of the principal objectives of the FHA was to increase the flow of capital to the housing markets by insuring private lenders against the risk of mortgage default.

It was not until 1968, however, in response to a perceived need to further broaden the capital base available for mortgages, that the housing finance system began to resemble its current form.

Accordingly, Ginnie Mae does not use derivatives to hedge and it does not carry long-term debt (or related outstanding securities liabilities) on its balance sheet.

These institutions include geographically diverse mortgage companies, commercial banks, and thrifts of all sizes, as well as state housing finance agencies.