Ginnie Mae Investing
CD and money market accounts currently offer dismal returns. What is an investor to do get higher returns, yet not drastically increase risk? As I mentioned in my 4% Rule to Investing, Ginnie Maes are a good possible alternative. Who is Ginnie and does she have anything to do with Fannie and Freddie? Ginnie Mae, otherwise known as the Government National Mortgage Association, is a U.S. government-owned corporation within the Department of Housing and Urban Development (HUD). Ginnie Mae provides guarantees on mortgage-backed securities (MBS) backed by federally insured or guaranteed loans, mainly loans issued by the Federal Housing Administration, Department of Veterans Affairs, Rural Housing Service, and Office of Public and Indian Housing. Ginnie Mae securities are the only MBS that are guaranteed by the United States government. Ginnie Mae, which extracts fees for guaranteeing mortgage investors are repaid, is a smaller and more conservative player in the mortgage market than Fannie Mae and Freddie Mac were.
Expect Even Lower CD Rates
Want some insight into why savings, CD rates, and money market rates are low and about to get lower? The FDIC recently ruled banks that are not “well capitalized” will not be allowed to sell fixed investment products for more than 75 basis points (or 0.75%) above the national average. Whatever “well capitalized” means is subject to FDIC’s terms. This effectively puts a cap on the highest rate any bank can offer.
The 4% Rule to Investing
As you probably already know, returns on fixed rate investments are pretty bleak. The Federal Reserve, since last year, has effectively set rates to zero. This made traditionally safe investments (CDs, government bonds, and money market accounts, etc.) limited with their returns. At the time of this writing, the only previously mentioned investments you can find higher than 4% is a 30-year treasury, and I’m not sure that’s a wise bet.
Lending Club Review – How to Become a Bank
Click here for an update of the Lending Club reviewDid you ever wish when applying for a bank loan, that you were the loan officer sitting on the other side of the table? Well now you can with peer-to-peer (P2P) lending services like Lending Club. They offer a higher rate of return (over 9.6%) than many other traditional investments and you have some ability to manage risk. It’s similar in class to bonds, but is more like if you owned a bank and were the loan officer. You determine which loans you want to approve, and which ones to pass on. Sounds interesting? Keep reading for more details.
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