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.
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.
The new capital buffer deal has a limited life. At current earnings rates, Fannie will reach the $25 billion buffer cap in about two years, Freddie a little later.
Economists say an increase of 1 degree Celsius in a county’s 36-month average temperature reduces the mortgage approval rate in the county by about 0.9% and the average loan amount by 6.9%.
The Treasury Department envisions a multi-year recapitalization of the GSEs. Secretary Steven Mnuchin told the Senate Banking Committee on Tuesday that the process is already underway.
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