Nearly 90% of loan liquidations in Ginnie MBS resulted from borrower payoffs in the third quarter, with most of them linked to MBS issued in 2020 and 2021.
Bank demand for agency MBS is weak, leading to wider spreads and losses on MBS holdings for some. Banks are also reducing their lending activity, providing an opening for nonbanks.
Desperate times call for desperate measures. But, perhaps, having the GSEs create demand by purchasing (a lot) more of their own MBS in an effort to lower rates is a bridge too far.
Industry trade groups have sent letters to the Federal Reserve chair, asking for an end to its quantitative tightening and rate hikes in an effort to reduce mortgage rates and stimulate home sales.
Mortgage rates remain stubbornly high by modern standards with the spread between the 10-year Treasury and MBS showing no mercy. Is there any hope on the horizon for a reprieve? Probably not.
Ever since the Fed started its rate-hiking cycle, the spread between interest rates on loans in agency MBS and the 10-year Treasury rate has been elevated. Prepayment risk is to blame and there’s no easy fix.
Mortgage securitization rates remained at previous levels as new primary market production and MBS issuance grew at similar rates in the second quarter. (Includes data chart.)
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