The Federal Reserve Bank of New York will have likely added nearly $1.5 trillion of MBS to the System Open Markets Account by January, and the Fed will once again own more than a third of all agency product.

MBA President Bob Broeksmit argues that the new LLPA “flies in the face of the administration’s recent executive actions urging federal agencies to take all measures within their authorities to support struggling homeowners.”

When panic first set in over the economic impact of COVID-19, investors sold off historically large volumes of MBS and Treasuries. As a result, liquidity and pricing efficiency both took a beating. It was the Fed’s gluttonous appetite for these securities that brought markets off the cliff.

The final rule will have implications on adoption of the Secured Overnight Financing Rate.

After Sept. 15, Fannie Mae and Freddie Mac will no longer accept LIBOR loan applications. Moreover, the FHFA and the GSEs expect all loan purchases linked to the London benchmark to cease by yearend.

Mortgage servicers’ liquidity issues could ease if non-agency lending is acceptable collateral under the TALF programs, according to Urban Institute’s Jim Parrott.

Treasury Secretary Steven Mnuchin said in an interview late Thursday that the Trump administration has no plans to fund a Federal Reserve facility to finance servicer advances.

Fannie Mae and Freddie Mac will purchase single-family mortgages that are in forbearance. But there’s a catch: steep LLPAs.

Over the last couple of weeks, the Federal Reserve has slowly tapered its MBS purchases. But even with healthy MBS prices, mortgage rates remain higher than formula dictates.

Analysts estimate that GSE forbearance programs will ultimately cost servicers between $80 billion and $150 billion in advances and escrow payments, bolstering the theory that only the Federal Reserve has the wherewithal to provide interim financing.