Concentration of VA loans in Ginnie Mae MBS issuance exceeds 40%

The share of Department of Veterans Affairs-guaranteed loans in Ginnie Mae mortgage-backed securities issuance rose to 42% in the most recent fiscal year from almost 39%, and could continue to rise.

It was 10 years ago that the VA's share in Ginnie issuances was just 16%. The year-over-year improvement was the latest annual gain in the VA share of Ginnie Mae issuance since FY 2012 and the third largest seen in the past decade. The federal fiscal year ended on Sept. 30.

Only the jump of nearly 10 percentage points between FY 2011 and FY 2012 and the 4 percentage-point increase between FY 2012 and FY 2013 were larger.

Ginnie’s market share calculations were based on the original principal balance of loans issued in mortgage-backed securities during each fiscal year between 2009 and 2019.

Indicators to date suggest the VA share could continue to climb in the coming fiscal year as well.

In November, credit availability increased in the government market for the first time in nine months as loans originated through the VA’s interest-rate reduction refinancing loan program and other streamline refinances increased. IRRRL activity was up 75% in the past fiscal year, according to the VA.

The notable increase in refinance activity for VA-guaranteed loans, combined with the overall rise in share in government issuance, had led to policy changes at Ginnie Mae.

The changes were aimed at alleviating investor concerns and protecting VA borrowers from possible predatory activity.

However, the Trump administration signed into law a bill that would ease one of these restrictions recently, citing some unintended consequences it had for lenders.