The jump in refinance business, and a shift from cash-out to rate-term transactions, changed the credit-risk profile for Fannie and Freddie in the fourth quarter.
Agency pass-through MBS remain the most popular asset in bank holding company trading accounts, but there was a sharp increase in agency multifamily securities during the third quarter.
The fastest-growing sectors of the MBS market in the third quarter were Ginnie Mae and the non-agency market. Banks, foreign investors, money managers and insurance companies easily offset the slow decline in the Fed’s portfolio. (Includes two data tables.)
Much of the decline was the result of a change in how Freddie Mac classifies loans subject to a repurchase claim for which the seller has provided a remedy.
Freddie repurchases dropped in the third quarter as the GSE changed how it classifies loans with defects that have been cured by the seller. Withdrawn buyback claims were up. (Includes three data tables.)
Most REITs reported substantial increases in their agency MBS holdings during the third quarter, although a few firms pulled back. Non-agency MBS were up slightly; MSR declined.
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