Jumbo Pool

That really big house with the really big pool you went to a few times as a kid. The jumbo pool. The pool like no other.

Once you grow up, a new kind of jumbo pool catches your eye: the Ginnie Mae II mortgage-backed security (MBS) multi-issuer pool.

Now we’re talking.

Jumbo pools are the next level in the financial evolution of MBSs. We started with single-issuer pools, which place a bunch of similar mortgages together, all by the same bank. Jumbo pools have more than one issuer, and they’re huge. Investors like jumbo pools because they’re so big, which means you can get great diversity and shared risk. If you invest in a jumbo pool, you’ll get principal and interest payments every year or so from the borrowers whose mortgages are in the jumbo pool.

Investing in a jumbo pool may sound fun...but it’s not so much if too many borrowers in the pool refinance, i.e. pay off their entire mortgage, or pay off their mortgage quickly. These are the risks that come with investing in MBSs in general.

Good for them, anti-climactic for you.