As nine more people were arrested in New York last week in the fraud scandal surrounding the HUD-sponsored 203(k) federal home ownership program, several MBS market participants following the story admitted a surprising realization: they were not fully aware that Ginnie Mae I pools had such an extensive exposure to these loans until news of the fraud broke.

In fact, several investors and analysts were alarmed to learn that some Ginnie Mae bonds - which are supposed to be backed by pools that are made up of a diversified set of assets - are in fact made up of pools backed by a single issuer.

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