The second quarter brought a big increase in bank holdings of Ginnie Mae pass-throughs. Banks reduced their investment in GSE pass-throughs but upped their agency CMOs. (Includes two data tables.)
Key mortgage industry stakeholders say an IPO of GSE stock would have trouble attracting investors if FHFA remains their conservator or they are released without an explicit guarantee.
Mortgage rates and MBS spreads may depend on how the White House structures the proposed IPO for the GSEs and how markets react to a potential merger of the two mortgage giants.
President Trump said he plans to maintain an implicit guarantee for the GSEs if they’re removed from conservatorship. Prominent agency MBS investors expressed relief about the administration’s stance on GSE reform even though they don’t expect near-term action.
Investors saw the value of their agency MBS holdings drop in early April due to volatility tied to trade policies. Many markets recovered from the volatility by the end of June, but the agency MBS market lagged.
Federal Reserve Governor Christopher Waller said the central bank’s balance sheet hasn’t grown as much as people think, but that MBS sales might be needed to balance the duration of assets and liabilities.
It may take time for MBS investors to fully understand how use of the new credit score for underwriting loans sold to the GSEs impacts pricing and hedge strategies.
Changes to Common Securitization Solutions, including being renamed U.S. Financial Technology, appear to set the company up to serve additional secondary mortgage market participants.
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