Full Faith And Credit


DEFINITION of 'Full Faith And Credit '

A phrase used to describe the unconditional guarantee or commitment by one entity to back the interest and principal of another entity's debt. This full faith and credit commitment is typically employed by a government to help lower the borrowing costs of a smaller, less stable government or a government-sponsored agency. When this occurs, the smaller government or agency takes on the backer's credit quality.

BREAKING DOWN 'Full Faith And Credit '

The Government National Mortgage Association (Ginnie Mae) is one example of a government agency that is backed by the full faith and credit of the U.S. government. It is generally accepted that the U.S. government will never default on its loan obligations. The full faith and credit of the U.S. government essentially confers risk-free status to securities such as U.S. Treasuries. Similarly, securities backed by Ginnie Mae mortgages have lower yields than other mortgage-backed securities because they are assumed to carry less risk.

  1. Private Buyer

    An individual or organization that is purchasing an asset and ...
  2. Federal Agencies

    Special government organizations set up for a specific purpose ...
  3. Ginnie Mae - Government National ...

    A U.S. government corporation within the U.S. Department of Housing ...
  4. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  5. Pass-Through Security

    A pool of fixed-income securities backed by a package of assets. ...
  6. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with ...
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