The novelty of prepayment as a primary risk factor is one of the charms MBS have for foreign investors, particularly sophisticated institutional investors. That’s because it has a relatively low correlation factor with other assets.
Industry MBS holdings rose 3.6% to $1.98 trillion as of the end of September, with most of the gains coming in agency pass-throughs. Wells, Chase, BB&T and Citi all posted big gains, BofA not so much. (Includes two data charts.)
Increased interest volatility and widening spreads challenged REIT MBS investors in the third quarter as both agency and non-agency holdings declined. (Includes data chart.)
The issue of fast prepays on VA IRRRLs refuses to die. Recently, VA mailed a warning letter to as many as 500 lenders. Inside MBS & ABS obtained a copy of the correspondence.
MBS and MSR investor New Residential signaled that it might engage in a large stock buyback program, but so far there’s been no activity. It’s possible political considerations might be a factor.
Redwood Trust’s investments have generated returns of around 12% so far this year. The REIT is increasing acquisitions of re-performing loan securities issued by Freddie Mac.
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