Silicon Valley Bank failed after complications involving funding provided to the bank by the Federal Home Loan Bank system and the Federal Reserve. MBS holdings also played a role in the bank’s failure.
The MBS held by two failed banks will soon hit the market; specified pool trades hit record level in March; Fannie increases disclosures on multifamily MBS; LIBOR to live on in synthetic form.
The Bank Term Funding Program comes in the wake of Silicon Valley Bank incurring losses on sales of MBS at current prices, which it undertook to pay back depositors.
Agency MBS market recovering after dismal 2022; KBRA generally plans to decline reviewing RAC requests tied to switches from LIBOR to term SOFR in the commercial MBS market.
The delinquency rate on loans in agency MBS increased gradually between March and September, then spiked during the fourth quarter. (Includes data chart.)
While agency MBS trading typically slows towards the end of the year, the average daily volume of trades in December 2022 was the lowest on record since the beginning of 2020. Banks are showing weak demand for the securities.
With lenders pushing mortgages that include a temporary buydown feature, MBS investors are pondering prepayment behavior for the loans. Expect loans with temporary buydowns to exhibit prepayment speeds similar to ARMs, according to an industry analyst.
Interest rates keep falling but has a trough been reached? And if so, have REITs been bottomfishing in conventional MBS? Also, what’s the outlook for 2023 in terms of capital raises?