Freddie recorded the biggest decline in the agency market, while Ginnie dodged the worst of the downturn. Agency multifamily MBS issuance was up, however, as was non-mortgage ABS production. (Includes three data charts.)
When the financial outlook weakens, equity prices suffer and debt prices soon follow. Mortgage REITs are no exception. But overall, the cohort is holding up better than nonbank lender/servicers.
The REIT has built up strong residential and MSR businesses to diversify risk and support its agency prowess. And while it’s held back on increasing leverage, once volatility declines, all that may change.
Weak MBS trading activity usually isn’t a good sign. To some it portends a lack of liquidity, to others cloudiness in a market that has lost its way. Regardless, daily MBS trades in May were not pretty.
When it comes to borrowing money in the secondary market these days, mortgage servicing rights are a great form of collateral. Reason? Rates are high and the asset will stick around for a long time.
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