When panic first set in over the economic impact of COVID-19, investors sold off historically large volumes of MBS and Treasuries. As a result, liquidity and pricing efficiency both took a beating. It was the Fed’s gluttonous appetite for these securities that brought markets off the cliff.
Some industry players believe FHFA Director Mark Calabria wants to use an activities-based review of the market to reduce regulations, which many observers think increase the cost of mortgages.