Vanguard – Fixed income – GNMA

The Government National Mortgage Association (GNMA or Ginnie Mae) issues agency bonds backed by the full faith and credit of the U.S. government. GNMA guarantees principal and interest on mortgage-backed securities (MBS) backed by loans insured by the Federal Housing Administration and the Department of Veterans Affairs. New GNMAs are issued in $25,000 minimum denominations.

MBS are an investment in a pool of mortgage loans, which are the underlying asset and provide cash flow for the securities. MBS are commonly referred to as "pass-through" securities, as the principal and interest of the underlying mortgage loans "passes through" to the investor. All bondholders receive a monthly pro-rata distribution of principal and interest over the life of the security. MBS are issued with maturities of up to 30 years, though most mature earlier.

Each MBS has an average life, an estimate of the time remaining until the final principal payment. Average life will vary based on changes in principal payments, which are driven by interest rates and the speed by which mortgage holders prepay their loans.

Credit rating

Taxability

Liquidity

Fees

Risks

Read more:

Vanguard - Fixed income - GNMA