U.S. Government Agency Securities
Chapters in this video
- 0:00 The helicopter parenting spectrum of agency backing
- 0:58 Pass-through MBS mechanics and monthly payments
- 1:39 Ginnie Mae vs Fannie and Freddie: who has full faith and credit
- 2:21 The Ginnie Mae trap: guarantor, not originator
- 3:08 The $25,000 minimum denomination
- 3:38 Conservatorship does not make Fannie and Freddie agencies
- 4:07 Fannie MBS vs Freddie participation certificates
- 4:38 Sallie Mae: fully private, student loan ABS
- 5:09 Why agency interest is fully taxable
- 5:53 32nds quoting convention for agency MBS
- 6:57 Rapid-fire exam recap
What this video covers
- How a pass-through mortgage-backed security (MBS) actually works, and why investors receive monthly principal and interest
- Why Government National Mortgage Association (GNMA, Ginnie Mae) is the only agency carrying the full faith and credit of the U.S. government, and the trap that Ginnie does NOT originate or purchase mortgages
- How Federal National Mortgage Association (FNMA, Fannie Mae) and Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac) differ as government-sponsored enterprises (GSEs) with only implied backing, even after 2008 conservatorship
- Why Freddie Mac calls its pass-throughs participation certificates (PCs), and how to spot that branding cue on the exam
- Why Student Loan Marketing Association (SLM, Sallie Mae) carries zero government backing and issues asset-backed securities (ABS), not MBS
- The tax gotcha: agency securities are fully taxable at federal, state, and local levels, unlike direct Treasury obligations
- How agency MBS are quoted in 32nds (so 98-16 means 98 and 16/32, or 98.5% of par), and the $25,000 minimum denomination on most Ginnie pass-throughs
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