The key factor for TBA investors is prepayment speeds. A quick scan of the FHFA data show that the conditional prepayment rates for UMBS issued by Fannie and those issued by Freddie have remained comparable since the launch of the single security in June.
The Fannie/Freddie JV in charge of the uniform MBS has a new CEO with a deep background in mortgage finance: Anthony Renzi. In early 2018, he was hired to run the day-to-day operations of Cenlar, the big kahuna of subservicing.
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%.
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