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

CED-77-16: Published: Nov 29, 1976. Publicly Released: Nov 29, 1976.

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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.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Department of Housing and Urban Development should determine the desirability of selling directly to the Federal Financing Bank, allow investors to bid on individual security issues rather than all issues offered, and reduce the minimum amount of the issue to less than $1 million.

    Agency Affected:


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