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.
The GSEs took hits to their net earnings as a result of hedging losses for the third straight quarter. The launch of the uniform MBS pushed Fannie and Freddie into an indemnification agreement.
All eyes are now focused on the TBA market to see if the new single security from Freddie Mac and Fannie Mae creates the expected bump in liquidity and efficiency.
The sharp downturn in purchase-money loans going into Fannie and Freddie MBS was accompanied by an even bigger drop in deliveries of loans with private mortgage insurance.
The secondary mortgage market could be in for historic change in the wake of President Trump this week ordering the Treasury Department to end the conservatorships of Fannie Mae and Freddie Mac and come up with a new paradigm.
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