Should lenders should consider custom Ginnie Mae pools?

Current conditions offer potential for mortgage lenders to benefit from exploring custom Ginnie Mae pools.

That’s according to Vice Capital Markets president Troy Baars who says lenders should consider the pools as part of their overall strategy due to recent increases in Ginnie Mae security volume, along with renewed investor interest in custom pools.

“Refinancing of existing mortgages has been driving an uptick in Ginnie Mae-insured securities, as investors now have cash to reinvest,” said Baars. “Because specified pools offer prepay protection that exceeds current multi-issuer pools, investors are willing to pay more for these securities to help protect their premium pricing from rapid payoffs. As such, now is the perfect time for lenders to consider adding custom Ginnie Mae pool deliveries to diversify their overall hedging strategy and improve their bottom line.”

The custom pools have been in focus recently as Ginnie Mae announced it was restricting a specific loan type from its top-level securities:

“Effective with mortgage-backed securities guaranteed on or after November 1, 2019, High LTV VA Cash-Out Refinance Loans (those with LTV ratios above 90%) are ineligible for Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools,” it said in a release.

But it clarified that high-LTV cash-out refinances could still be included:

“The new policy moves Ginnie Mae’s MBS pooling eligibility requirements closer to that of Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA). It also continues to provide veterans who use their earned benefit access to the government-guaranteed MBS market. Furthermore, it provides global investors with increased certainty in the performance of the Ginne Mae security, which ultimately lowers mortgage rates for all borrowers served by the program.”