GAO Testimony on Secondary Mortgage Market Activities by the Government National Mortgage Association

Gao ID: CED-77-16 November 29, 1976

Several alternatives to the present practices of the Government National Mortgage Association's secondary mortgage market activities warrant consideration.

The Association's ability to hold mortgages during periods when interest rates are relatively high is restricted by the Office of Management and Budget's required end of the fiscal year outlay ceiling. The Association requires bidders at security auctions to bid for all security issues offered. Security issues, required to have a minimum value of $1 million, have sold for a better price than individual mortgages and have attracted more nontraditional investors than have mortgage sales. If the amount required for a security issue had been reduced, the security auction method could have been used to sell some of the half billion dollars worth of mortgages sold under the whole loan auction method since January 1975.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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