Ginnie Mae Heading to $1 Trillion in Government Backed Mortgage Debt by 2010

So you thought the financial crisis ended the mad leveraged mortgages. Think again.

Mortgage bonds guaranteed by U.S. agency Ginnie Mae will probably swell to $1 trillion by the end of 2010 because borrowers with low down payments or bad credit scores can only qualify for government-insured loans, Bank of America Corp. analysts are saying.

The Federal Housing Administration, which insures loans with down payments as low as 3.5 percent and has no credit-score requirements, is “the only source of funding for these leveraged borrowers,” according to Ankur Mehta and Ohmsatya Ravi, who wrote the report, say.

Loans backed climbed to $680 billion as of June 30 from $360 billion two years earlier. Ginnie Mae continues to back the mortgages in the same format as the old days. Lenders package the mortgages into bonds backed by Ginnie Mae.