Hedge funds are paying as much as 20 cents on the dollar for preferred stock in Fannie Mae and Freddie Mac. Meanwhile, the GSE buyback war is not over yet.

Investors in subordinate tranches of recently issued non-agency jumbo mortgage-backed securities have seen strong returns on the investments. Real estate investment trusts have focused on the assets, which are likely to be subject to risk-retention requirements going forward. “We like the loan assets and the ability to diversify our funding in this manner where we don’t have a duration gap, there is no margin risk, and the assets and liabilities amortize and prepay at the same rate, eliminating the need for ...

Redwood Trust has recently put an increased emphasis on acquiring purchase mortgages. The loans have higher loan-to-value ratios than refinances included in Redwood’s non-agency mortgage-backed security issuance, a potential concern according to Kroll Bond Rating Agency. Redwood said it acquired $955 million in purchase mortgages from its correspondent lenders in the first quarter of 2013, up from $550 million the previous quarter. The purchase-mortgage share of Redwood’s acquisitions is also increasing ...

After years of holding onto investments in non-agency mortgage-backed securities even as prices declined significantly, the government-sponsored enterprises are preparing to sell some of their $101.5 billion in non-agency MBS holdings. Freddie Mac is offering $1.0 billion in non-agency MBS for sale with plans to unload as much as $5.0 billion this year, if pricing for the securities remains strong. A spokesman for the GSE said the sales are part of an effort to meet goals set by ... [Includes one data chart]

A significant increase in the non-agency sector’s share of mortgage finance could be completed with a revised infrastructure for non-agency mortgage-backed securities, according to Edward DeMarco, acting director of the Federal Housing Finance Agency. He said the model wouldn’t need to rely on a government guaranty to attract funding to the mortgage market, but would look to standardization and rules for enforcing contracts. While many housing finance reform proposals have called for a re-creation of ...

Activity in the non-agency jumbo market could play a big role in determining how to reform the government-sponsored enterprises, according to industry analysts. While policymakers consider what to do with Fannie Mae and Freddie Mac, some are calling for a larger role for the jumbo market as a test for GSE reform. Mark Willis, a resident research fellow at New York University’s Furman Center for Real Estate and Urban Policy, said the Federal Housing Finance Agency should increase the GSEs’ guaranty fees for ...

FHA jumbo loan originations increased in the first quarter of 2013 as well as from the same period last year pending hikes in the mortgage insurance premium and the required downpayment on loans above $625,500, according to Inside FHA Lending’s analysis of FHA data. FHA jumbo lenders produced an estimated $5.44 billion in loans over $417,000 during the first three months of the year, up 6.6 percent from the fourth quarter of 2012 and 14.0 percent higher compared to the volume from a year ago. Consumers continued to use the FHA jumbo product despite FHA’s decision to raise the annual mortgage insurance premiums on ... [2 charts]

The interim final rule authorizes the FHFA to review compensation of an executive officer at any of the GSEs.

Are investors making a big mistake by speculating in Fannie Mae/Freddie Mac common and preferred?

One investor paid $100,000 per unit for a special class of Fannie Mae preferred.