Evolving MBS landscape
Fannie Mae CEO Priscilla Almodovar explained that it costs more to originate these mortgages, referring to the additional costs associated with lending to underserved borrowers.
“This is the way for us to incentivize them,” she said.
Almodovar stressed that change is needed. The agency’s traditional reliance on domestic banks and the Federal Reserve as major MBS buyers is no longer viable. The Fed is no longer actively purchasing MBS, and banks have become less engaged in the market.
Over the past 15 years, Fannie Mae, Freddie Mac, and Ginnie Mae have issued around $4 trillion of MBS – nearly all of which has been absorbed by the Federal Reserve and domestic banks.
“Mortgage rates are going to be dictated by asset managers and no longer the Fed’s portfolio,” said Devang Doshi, a senior vice president at Fannie Mae.
Source: mpamag.com