The U.S has always paid its debts. For that reason, foreign countries can safely invest in U.S real estate in the form of bonds or securities. But who exactly is buying up our MBS? And why is it that foreign countries like to fatten their wallets with our real estate debt?
Sovereign Wealth Funds
About 90% of foreign MBS is held by Japan, Taiwan, China, South Korea, Ireland, Luxembourg, Cayman Islands, Bermuda, and a handful of other European countries (like Switzerland). Because Ginnie Mae MBS is fully backed by the U.S government, they offer zero risk and 100% return to their investors.
Although Ginnie Mae doesn’t buy, sell, or issue MBS; one of its program’s responsibilities is to make sure that investors receive their P&I (principal and interest) payments promptly. Because of these incredible perks, countries confidently invest their money in the U.S by buying up MBS for their sovereign wealth funds.
These funds are like the giant personal investment portfolios of countries, which they manage by investing in the wealth of other countries—just in case their national economy experiences market shock.
Who Owns Foreign MBS?
Asia currently dominates the foreign MBS market. Although foreign MBS ownership is mostly official, private investment in Ginnie Mae MBS happens more frequently in European countries such as Switzerland, Ireland, and Luxembourg. Mainly because these three countries have favorable tax laws that attract overseas investors.
But guess what? Foreign investment in Ginnie Mae MBS only accounts for 15.6% of the Ginnie Mae MBS market. The other 84.4%? It’s strictly owned by the U.S government.
Why You Should Buy a Home With a VA or FHA Loan
We invest in Ginnie Mae MBS to fund FHA loans, USDA loans, and VA loans. So chances are that if you’re a veteran, a first-time homebuyer with special circumstances, or a buyer who bought their home with a rural home loan—you’re part of a special set of buyers whose homes have increased government protections.
In a normal home loan scenario, a home buyer has their equity and homeowner’s insurance before Fannie or Freddie has to step in. In an FHA, VA, or USDA loan, the servicer of the mortgage is also held responsible for saving the mortgage (if for some reason the borrower can’t afford to make payments anymore).
The Ginnie Mae MBS program is also the highest quality of lending and program management that the mortgage industry has to offer. So if you find yourself buying a home and qualifying for an FHA or VA loan—just know that you’ve hit the jackpot, because these loans were built with your maximum security and convenience in mind.