By the Numbers
VA-heavy multi pools keep the squeeze on Ginnie TBA quality
This material is a Marketing Communication and does not constitute Independent Investment Research.
Ginnie Mae TBA collateral quality remains under pressure. Multiple-issuer pools are still dominated by large VA loans, while many FHA and rural housing loans with better call protection are diverted to custom pools. The VA share has eased as rates rose but remains historically high. Investors should demand a larger collateral-quality discount for Ginnie Mae TBAs. Specified-pool pay-ups should remain supported when call protection is reasonably priced.
VA loans have made up at least 60% of multiple-issuer pool collateral since October and nearly 70% in March (Exhibit 1). The high share largely reflects growth in custom-pool issuance, which diverts FHA, rural housing and low-balance loans from multi pools. Mortgage rates also matter. VA loans prepay faster when rates fall, boosting VA originations more than other government loans. That pushed concentration higher after rates fell last fall. The trend is reversing as rates rise.
Exhibit 1. VA concentration eased but remains historically high
Source: Ginnie Mae, Santander US Capital Markets.
The average loan size in new multi pools also is rising faster than in all new Ginnie pools (Exhibit 2). VA loans tend to be larger than other government loans, while custom-pool investors generally favor low-balance loans. Smaller loans tend to refinance more slowly when mortgage rates fall. Comparing multi pools with all pools helps account for home-price gains, which raise average loan sizes. Average loan sizes in both groups fell modestly as VA production slowed in recent months, but the gap widened. TBA convexity is therefore worsening faster than in the broader Ginnie Mae production universe. That should support pay-ups for custom pools and seasoned multiple-issuer pools.
Exhibit 2. Average loan sizes are still near all-time highs
The chart shows average loan size weighted by balance, a better measure of cohort prepayment risk than a simple average.
Source: Ginnie Mae, Santander US Capital Markets.
Custom pools remain a large share of Ginnie Mae issuance (Exhibit 3). They have accounted for at least 33% of issuance since the start of 2025 and at times more than 40%. The share has fallen since its September peak but remains historically high. Dollar issuance has been fairly stable since last June, suggesting the increase in custom pools is not a short-lived response to lower mortgage rates.
Exhibit 3. Custom pools still account for more than a third of total issuance
Custom-pool issuance as a share of total Ginnie Mae issuance. Fixed-rate 30-year MBS. Includes Ginnie Mae I and II pools. Ginnie Mae I production began slowing in late 2009 and had largely stopped by 2014.
Source: Ginnie Mae, Santander US Capital Markets.
Ginnie Mae pooling continues to steer call-protected collateral, including FHA and low-balance loans, into custom pools. That worsens the convexity of TBA-deliverable multiple-issuer pools. It also risks a downward spiral: As TBA collateral quality declines and pay-ups rise, originators gain an incentive to create custom pools backed by collateral that once was marginal. This issue is discussed in more detail here. Unless pooling incentives change, investors should treat weaker collateral quality as a lasting factor in Ginnie Mae TBA valuations and specified-pool pay-ups.
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