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.
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.
SOFR-linked debt is vulnerable to much higher rate volatility than those referencing LIBOR. This risk was highlighted last month when surging repo rates sent SOFR briefly to a record 5.25%.