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Ginnie Mae is opening its mortgage-backed securities program to a larger share of USDA rural multifamily debt. In an October 20 announcement, the agency said USDA Section 538 multifamily loans covering up to 80 percent of total development costs will be eligible for pooling in Ginnie Mae MBS, effective for loans submitted on or after November 1, 2026. The change aligns Ginnie Mae's securitization rules with a September 25 decision by USDA Rural Development that raised the maximum loan-to-cost ratio for the Section 538 Guaranteed Rural Rental Housing Program's Continuous Guarantee option from 70 to 80 percent. Until now, deals structured above 70 percent of development costs could not be pooled into Ginnie Mae securities. For developers and lenders working in rural markets, the update changes the math on projects that pair USDA guarantees with 4 percent Low-Income Housing Tax Credits. It also signals that the secondary market will follow USDA's underwriting rather than impose a separate, lower ceiling. This article explains what changed, which transactions benefit, and what lenders should check before November 1.
The core change is straightforward. Section 538 multifamily loans of up to 80 percent of total development costs, measured as loan-to-cost, will be eligible for pooling in the Ginnie Mae MBS program. The eligibility applies to loans submitted on or after November 1, 2026. Ginnie Mae described the updated requirement in All Participants Memorandum 26-14 and said applicable changes have been made to Chapters 31 and 32 of the MBS Guide, 5500.3 Rev. 1. Issuers with questions are directed to their account executive in the Office of Issuer and Portfolio Management or to Ginnie Mae's centralized help desk. The move directly follows USDA Rural Development's September 25, 2026 decision to raise the maximum loan-to-cost for the Section 538 program's Continuous Guarantee option from 70 to 80 percent. Ginnie Mae's pooling rules previously sat below USDA's new ceiling, which meant a loan could be guaranteed by USDA at the higher leverage but still face friction entering the secondary market. "Ginnie Mae supports efforts to provide reliable sources of liquidity for rural multifamily housing," Ginnie Mae President Joe Gormley said in the announcement. He framed the update as letting lenders and developers structure Section 538 transactions more efficiently while strengthening the connection between federal housing guarantees and the secondary mortgage market.
USDA's Section 538 Guaranteed Rural Rental Housing Program supports construction, rehabilitation and preservation of multifamily rental housing for low- and moderate-income households in eligible rural communities. Because these properties can be difficult to finance through conventional channels, USDA guarantees loans made by private lenders, drawing private capital into markets it might not otherwise reach. The Continuous Guarantee option is the structure at the center of this change. Under it, a single USDA guarantee covers both construction and permanent financing, rather than separating those phases. USDA's September increase of the maximum loan-to-cost ratio from 70 to 80 percent applies to that option. Ginnie Mae's announcement specifically ties the pooling change to that structure. The practical effect is that a developer using continuous guarantee financing can now carry more debt through both phases of the deal and still access Ginnie Mae securitization, instead of resizing the capital stack to fit the old 70 percent limit. The announcement also notes the change is particularly relevant for properties financed with 4 percent Low-Income Housing Tax Credits. In those transactions, development costs, available equity and other financing sources can combine to produce total costs that exceed the former 70 percent threshold. The higher ceiling gives those deals room that did not previously exist on the securitization side.
Ginnie Mae put numbers behind the announcement. By the end of fiscal year 2026, its securities portfolio included approximately $2.25 billion in outstanding USDA-guaranteed multifamily, supporting 1,378 Section 538 loans across 47 states and one territory. That existing scale matters for two reasons. First, it shows the Section 538 channel is already a meaningful source of rural multifamily capital, not a pilot. Second, it tells lenders that the pooling path for these loans is established: the October 20 change raises the leverage ceiling on a functioning program rather than creating a new one. For rural housing markets, the agency framed the update as supporting both new development and preservation of existing affordable housing. Properties in small towns and rural areas often depend on Section 538 because conventional multifamily debt is scarce or priced against them.
The announcement adjusts Ginnie Mae's pooling eligibility. It does not change USDA's program rules beyond the September loan-to-cost increase, and it does not guarantee that any particular loan will be made, guaranteed or securitized. Lenders should not read the update as relaxing underwriting. USDA's guarantee standards and Ginnie Mae's issuer requirements continue to apply. The change addresses the maximum share of development costs eligible for pooling, not the credit analysis behind the loan. The timing is also specific. Loans submitted before November 1, 2026 remain under the prior pooling limit. Deal teams working on transactions in the pipeline should confirm which date governs their submission and avoid assuming the higher ceiling applies retroactively. Finally, the 80 percent figure is a ceiling tied to the Continuous Guarantee option, not a target every deal should reach. The appropriate leverage for a given property still depends on its market, costs, equity sources and long-term operations.
Ginnie Mae does not lend to developers directly. Its role is to guarantee securities backed by federally insured or guaranteed loans, which gives lenders a reliable way to sell those loans into the capital markets and recycle the proceeds into new lending. When a loan type is eligible for pooling, lenders can price and commit with more confidence because they know where the loan will live after closing.
That is why a pooling ceiling matters even to borrowers who never interact with Ginnie Mae. A Section 538 loan that could not be pooled above 70 percent of development costs forced lenders to hold more risk or push borrowers to restructure. Aligning the pooling limit with USDA's 80 percent guarantee ceiling removes that mismatch for the transactions it covers.
Section 538 exists because rural rental housing often cannot attract conventional multifamily debt on workable terms. The properties involved serve low- and moderate-income households in eligible rural communities, including rural workers, families and seniors who depend on them.
Owners and managers of existing rural properties should pay attention to the preservation side of the announcement. Ginnie Mae framed the update as supporting development and preservation alike. For aging Section 538 properties, refinancing and rehabilitation structures that were previously capped by the pooling limit may now pencil differently, especially where 4 percent tax credit equity is part of the plan.
The announcement does not change day-to-day compliance obligations on existing properties. Tenant certifications, property standards and program rules continue under their existing authorities. What changes is the financing headroom available for the next transaction.
Two dates govern the new landscape. USDA's underlying loan-to-cost increase for the Continuous Guarantee option took effect with its September 25, 2026 decision. Ginnie Mae's pooling eligibility follows for loans submitted on or after November 1, 2026.
Between those dates sits a short transition window. Deals submitted before November 1 remain subject to the prior pooling limit, so sequencing matters for transactions on the margin. Deal teams should confirm submission timing with their Ginnie Mae account executive rather than assuming the new ceiling applies to anything already in process.
Looking ahead, the updated Chapters 31 and 32 of the MBS Guide are the operative references. Lenders should verify that their internal systems and checklists reflect APM 26-14 before their first submission under the new limit.
Lenders with active or planned Section 538 transactions should review APM 26-14 and the updated MBS Guide chapters before structuring submissions on or after November 1. The memorandum and guide language control the mechanics; the press announcement is a summary, not the operative text.
Developers working with 4 percent tax credit equity in rural markets should revisit deals that were resized or shelved because they could not fit within the 70 percent pooling limit. Some of those capital stacks may now work, particularly where the gap was small.
Property managers and owners of existing Section 538 properties should note the preservation angle. The update is aimed at rehabilitation and preservation as well as new construction, so refinancing conversations for aging rural properties may benefit from the higher ceiling.
For organizations tracking federal housing finance, the announcement also carries a policy signal. Ginnie Mae tied the change to recent executive orders on mortgage credit access and regulatory barriers, aligning rural multifamily liquidity with the administration's stated housing-finance priorities. Whether further alignment steps follow is worth watching through the next round of All Participants Memoranda.
Ginnie Mae announced October 20 that USDA Section 538 multifamily loans up to 80 percent of total development costs will be eligible for MBS pooling, effective for loans submitted on or after November 1, 2026.
The change aligns Ginnie Mae's securitization rules with USDA Rural Development's September 25 decision raising the Continuous Guarantee option's maximum loan-to-cost from 70 to 80 percent.
The update is especially relevant for rural transactions financed with 4 percent Low-Income Housing Tax Credits, where deal costs can exceed the former 70 percent pooling ceiling.
The existing program is substantial: about $2.25 billion in outstanding USDA-guaranteed multifamily securities supporting 1,378 Section 538 loans across 47 states and one territory as of the end of fiscal year 2026.
Lenders and developers should review APM 26-14 and the updated MBS Guide chapters, confirm submission timing, and revisit rural deals that were resized to fit the old limit.
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