Browse articles from all of our Newsletters related to Treasury.

December 2, 2016 - Inside MBS & ABS

Rate Shock Doesn’t Portend Well for Bank, Overseas Investors in MBS, Analysts Say

Analysts at Wells Fargo Securities worry that the post-election rate shock is not a positive omen for bank and overseas investors in MBS. “Since the U.S. presidential election, the 10-year yield has sold off by 55 basis points in a matter of two weeks,” they said in a recent client note. “Although banks and overseas investors are typically looking to buy on dips, large selloffs do not bode well for demand from these investors right after a rate shock. For banks, a large rate shock results in a hit on their regulatory capital.” According to their calculations, during the week ending Nov. 9, 2016, the net realized gains on bank portfolios declined...

December 2, 2016 - Inside MBS & ABS

MBS Prices Continue to Dive as the Rates Climb; FNMA 3.5 Replaces the 3.0 as the Benchmark

The average daily trading volume in agency MBS hit a yearly high of $224.4 billion in October, according to figures compiled by the Securities Industry and Financial Markets Association. With liquidity improving, the year-to-date average now stands at $206.6 billion, compared to $198.7 billion in 2015. The November reading should be out by the end of next week. Investors might be...

December 2, 2016 - Inside MBS & ABS

Can Former MBS Trader Steve Mnuchin Privatize the GSEs? And What About the Government MBS Guaranty?

Shortly after being nominated by President-elect Donald Trump to be his Treasury secretary, investment banker Steve Mnuchin midweek dropped a bombshell on the mortgage market: Ending the conservatorships of Fannie Mae and Freddie Mac would be a top priority. For the most part, the mortgage industry cheered the news, believing that at the very least, Mnuchin would preserve the federal guaranty on existing MBS and into the future. In fact, the market seems to be betting on it. But now comes...

December 1, 2016 - Inside Mortgage Finance

Mortgage Industry Parses Tea Leaves As Trump Begins Assembling Cabinet

The incoming administration of President-elect Donald Trump is likely a couple of months away from formal confirmation by the U.S. Senate of new cabinet officials. But at least one position has apparently been settled – that of Treasury secretary – and other names have been circulated, including that of a possible head of the Department of Housing and Urban Development. At the same time, Trump has begun fleshing out the personnel that will serve on various “landing teams,” which help ease the transitions at various federal agencies. On the cabinet level, the new president has decided...

December 1, 2016 - Inside Mortgage Finance

Warehouse Sector Continues to Hum Along. Commitments Rise but Managers Express Concern About Rising Rates

Warehouse providers ended the third quarter with $58.0 billion of commitments on their books, a modest improvement over the prior period and a sign that nonbanks still hunger for residential credit. Compared to the same quarter a year ago, warehouse commitments increased an impressive 23.4 percent, according to survey figures compiled by Inside Mortgage Finance. That’s the good news. Now comes the bad: with interest rates rising since the election, warehouse managers are voicing their concern about what may lie ahead, namely lower originations. “Right now it feels...[Includes one data table]

December 1, 2016 - Inside Mortgage Finance

Light in the GSE Tunnel?

Steven Mnuchin, President-elect Donald Trump’s choice to be the next Treasury secretary, startled financial markets this week by indicating he would act quickly to bring Fannie Mae and Freddie Mac out of government conservatorship. “We’ve got to get Fannie and Freddie out of government ownership,” Mnuchin said during an interview with Fox News. “It makes no sense that these [two] are owned by the government and have been controlled by the government for as long as they have. In many cases, this displaces private lending in the mortgage markets, and we need these entities to be safe.” Mnuchin, a former Goldman Sachs executive who bought the failed IndyMac Bank and resurrected it as OneWest, continued...

November 23, 2016 - Inside MBS & ABS

GSE Shareholder Case Attorney Details Plight of Fairholme in Ongoing Litigation

Fairholme Funds officials this week continued to press their case for restoring shareholder rights for private investors in Fannie Mae and Freddie Mac, expressing hope that the incoming Trump administration will be friendlier to their cause. In Fairholme Funds Inc. v. United States, et al, the plaintiffs argue that the net worth sweep imposed by the Treasury Department and Federal Housing Finance Agency was illegal and that the two government-sponsored enterprises were not in a “death spiral” at the time of the bailout as the government claims. During a conference call this week, Fairholme CEO Bruce Berkowitz said...

November 18, 2016 - Inside MBS & ABS

Panelists Highlight Concern with Growing Fannie Mae, Freddie Mac Credit-Risk Sharing Program

The government-sponsored enterprises’ credit-risk transfer programs have been wildly popular with investors and many policymakers, but other industry observers see problems. One of the most outspoken critics is Tim Howard, a former Fannie Mae CFO, who sees a big difference between today’s CRT programs and the GSEs’ traditional method of laying off credit risk before they were taken into government conservatorship. “When I was at Fannie, the companies purchased...

November 11, 2016 - Inside MBS & ABS

GSE Shareholders Spar With Government Agencies Over Timing of Document Release

Over the past couple of weeks, a battle has been brewing over the government’s response to a court order to release dozens of documents regarding the U.S. Treasury’s net worth sweep of Fannie Mae and Freddie Mac profits. Plaintiffs in Fairholme Funds Inc. v. United States, et al, filed an emergency enforcement motion arguing that the government is purposely taking too long to produce the documents and requesting unnecessary extensions. Federal Claims Court Judge Margaret Sweeney ordered the Federal Housing Finance Agency and the Treasury to turn over 56 documents to the plaintiff’s attorney, under seal, back in mid-September. The agencies had been...

November 11, 2016 - Inside MBS & ABS

Market Left With Little Clue as to Fate of Fannie, Freddie Under Incoming Trump Administration

Market analysts, observers and participants alike feel pretty much in the dark about what to expect from Republican President-elect Donald Trump when it comes to the fate of government-sponsored enterprises Fannie Mae and Freddie Mac. “Mortgage finance legislation and the future of the GSEs was never discussed during the campaign so there are no clear indicators of what a Trump administration will do regarding the future of Fannie Mae and Freddie Mac,” analysts at Keefe, Bruyette & Woods said in a post-election review. Complicating life for the new regime is...

November 4, 2016 - Inside MBS & ABS

New Regulations Aimed at ‘Earnings Stripping’ Tax-Avoidance Schemes Will Impact Certain ABS

New regulations from the Treasury Department and IRS regarding “earnings stripping” tax-avoidance schemes by multi-national companies will apply to ABS in certain circumstances, causing problems for issuers and investors, according to industry analysts. The regulations aim to reduce the benefits of corporate tax inversions and earnings stripping by distinguishing debt from equity. “Earnings stripping can reduce a company’s tax bill by generating large interest deductions when that company simply increases its debt to an affiliated foreign firm, without financing new investment in the U.S.,” Treasury Secretary Jacob Lew said when announcing the new regulations in October. The regulations generally apply...

November 4, 2016 - Inside MBS & ABS

It’s Now December or Bust for a Rate Hike This Year As FOMC Holds Interest Rates Steady as in 2015

The Federal Reserve’s Open Market Committee appears to be repeating last year’s story line of promising multiple increases in interest rates at the start of the year, only to delay and delay until the final month, when it finally raised rates a bare minimum of 25 basis points. This month, the Fed passed on another opportunity to raise rates and suggested to many in the market that it finally will ratchet the federal funds target rate up a notch at its final meeting of the year in mid-December. The FOMC said the labor market has continued to strengthen and economic activity has picked up from the modest pace seen in the first half of this year. “Although the unemployment rate is little changed in recent months, job gains have been solid,” the committee said. Meanwhile, household spending has risen...

October 28, 2016 - Inside The GSEs

GSE Roundup

Fairholme Files Motion to Force Government to Produce Docs ASAP. Plaintiffs in Fairholme Funds Inc. v. United States, et al, filed an emergency enforcement motion this week arguing that the government is purposely taking too long to produce documents and requesting unnecessary extensions. “The defendant has repeatedly delayed complying with the court’s order,” said Fairholme in the court documents. The judge gave the government until Nov. 1 to produce the documents. Freddie prices $217M K-deal. Freddie Mac priced a new offering of Structured Pass-Through Certificates (K Certificates) that are backed by underlying collateral consisting of supplemental multifamily mortgages. The company expects to issue approximately $217 million in K Certificates, which...

October 27, 2016 - Inside Mortgage Finance

CBO Lays Out GSE Recap Scenario, Touts Benefits to Mortgage Market, Federal Budget

Recapitalizing Fannie Mae and Freddie Mac is a good idea, according to the Congressional Budget Office, which said that it wouldn’t significantly change how the government-sponsored enterprises operate today, but it would help stabilize the mortgage market and the federal budget. In response to several legislative proposals calling for the GSEs to build capital, the CBO recently published a report studying the effects of an “illustrative policy option.” Fannie and Freddie capital will...


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25 to 50 basis points per loan
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