A mortgage with a prepayment penalty might be as much as 65 basis points cheaper for borrowers, according to GSE shareholder Bill Ackman.

As long as the GSEs are profit-seeking entities, Urban Institute analysts suggest that allowing Fannie and Freddie to buy large amounts of agency MBS would leave the GSEs “with every incentive to swell their balance sheets to enormous levels during these periods of volatility.”

The securitization rate for residential mortgages originated during the third quarter was near the same level seen in 2019. Meanwhile, the share of GSE-eligible mortgages that flowed into MBS increased.

Freddie sets an end date for investors to exchange legacy securities for those created as part of the single security initiative.

Some large lenders are seeing their cash-window availability capped or being cut off altogether, according to trading advisors. Communications from the GSEs and FHFA on the matter are vague.

The growing securities holdings in Fannie’s retained mortgage portfolio include a large share of non-Fannie agency MBS.

Federal Reserve Ends Balance Sheet ReductionAfter 42 straight months of allowing its security holdings to run off, the Federal Reserve finally said “enough.” The central bank’s current balance sheet: $6.134 trillion.

Bill Ackman’s plan calls for Treasury to forgive its senior preferred shares, a strategy that some industry observers say would be politically risky for President Trump.

Securities industry stakeholders say preservation of the secondary mortgage market, especially MBS futures trading on the TBA market, is essential to keeping mortgage rates low.

While the Fed is moving away from purchases of agency MBS, portfolio managers at PIMCO believe additional purchases are warranted. In the meantime, the GSEs are increasing their investments.