Hensarling posted his August 13, 2013 keynote address at the George W. Bush Presidential Center. His central argument is that “Washington promoted moral hazard by protecting Fannie Mae and Freddie Mac, which privatized profits and socialized losses.”
Tag Archive for Freddie Mac
Contributors- Economic and Financial, Must Read, Taken Down
The shrinking MBS market – Sober Look
by Sober Look • • 0 Comments
As discussed earlier, the supply of mortgage-backed securities (MBS) continues to fall behind the potential demand – even with the Fed’s taper in place. New issuance has steadily declined over the past year, with the Fed becoming an increasingly larger…
Contributors- Economic and Financial, Must Read
Compromise On Eminent Domain/Mortgage Seize – Logan Mohtashami
by Logan Mohtashami • • 0 Comments
Compromise On Eminent Domain / Mortgage Seize Logan Mohtashami, Benzinga Contributor December 03, 2013 4:52 PM The use of eminent domain to seize mortgages sound odd? Local government seizing private investments in order to enhance the economic value … Continue reading →
Contributors- Economic and Financial, Must Read, Taken Down
Key trends in US mortgage markets- Sober Look
by Sober Look • • 0 Comments
The recent increase in long-term rates is causing major changes in the mortgage markets. Here are some key trends:
1. Refinancing activity continued to decline through Q3. The proportion of mortgage applications for purchase vs. refi has doubled this year (and that’s not because of higher demand for homes).
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Source: DB |
2. A number of lenders who focused on mortgage refinancing such as US Bank, Provident Funding, and Flagstar are struggling (although the largest banks such as Chase and Wells seem to be less affected). This may result in an increase in the number of riskier mortgages.
DB: – Lenders who specialized in refinancing transactions have experienced dramatic loss of market share and either will have to become more competitive on rates in growth sectors such as ARMs to regain market share or loosen credit standards.
3. While a larger number of buyers now prefer ARMs, the dynamic within the fixed rate universe is a greater demand for 30-year mortgages vs. 20 or 15. That’s because the monthly payments on 30-year mortgages are lower (slower principal repayment) and buyers are looking for the cheapest solution.
DB: – As interest rates have risen and volume has dropped, the product mix has shifted sharply … 30-year mortgages are much more popular with homebuyers—more than 50% of 30-year mortgages are used for purchase transactions but less than 20% of shorter-term mortgages. As a consequence, the share of 15-year mortgages fell from 20% in September to 17% in October as the share of 30-year lending rose to 63% from 59%. Meanwhile, the ARM share has doubled to more than 5% since June as HARP’s share of lending has fallen to 3% from a high of 7% this spring.
4. As a result, MBS bond markets are taking a hit in the form of lower volumes. The sharp decline in refinancing activity has reduced the need to issue new agency mortgage bonds. New issuance is the lowest in years.
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Source: SIFMA (note: this includes CMBS but the bulk of the activity is agency MBS) |
Similarly, trading volumes in MBS have dropped off to new lows.
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Source: SIFMA |
Here is a summary on US mortgage markets from Freddie Mac (who, just as Fannie Mae, has been issuing fewer bonds):
Frank Nothaft, Freddie Mac Chief Economist: – With the close of 2013 will also come a major transition in the housing finance industry. For the first time since 2000, we’re going to see the mortgage market dominated by purchase activity as the refinance share drops below 50 percent. And with mortgage rates rising, we’re also going to see the home-sales gains as well as the impressive house price growth begin to moderate to more sustainable levels.
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Contributors- Economic and Financial, Must Read, Taken Down
Freddie Mac takes the first step in transferring mortgage default risk to the private sector – Sober Look
by Sober Look • • 0 Comments
“Wind down the two companies and end their longtime implicit guarantee” is a hell of an undertaking, considering that transferring these agencies into private hands did not work so well the last time. What about simply getting rid of them?
Money Morning, Must Read
Hedge Fund Sues Government Over Seizing Fannie Mae, Freddie Mac Profits – Money Morning
by Gary Gately • • 0 Comments
A hedge fund hoping to capitalize on the comeback of Fannie Mae and Freddie Mac claims in a lawsuit the government illegally seized the profits of the two mortgage finance giants.
The suit, filed Sunday by Perry Capital LLC, says the government violated a 2008 law that put Fannie and Freddie into conservatorship, through an amendment changing the terms of the government’s bailout.
Contributors- Economic and Financial, Must Read, Taken Down
Agency MBS market will be shrinking rapidly – Sober Look
by Walter Kurtz • • 0 Comments
The chart below shows fixed rate agency MBS issuance since the financial crisis. With the Fed taking out some half of this gross issuance (see post), one would think there should be paper left for other investors, right?Source: JPMorganWrong. The net (…
Charts, Economics, Housing, Latest Business Headlines, Lee's Free Thinking, Must Read
Latest Lagging Government Housing Index Confirms New 12 Month High In Median US Home Price
by Lee Adler • • 0 Comments
FHFA Press Release- Follow the money. Find the profits!Liquidity is money. Regardless of where in the world that money originates, eventually it flows to and through Wall Street. So if you want to know the direction of the next big moves in stocks and bonds, just follow the money. Lee Adler’s Liquidity Trader tracks and…
Housing News, Latest Business Headlines
Americans Sees Biggest Home Equity Jump in 60 Years: Mortgages – Bloomberg
by Newswires • • 0 Comments
Home equity in the first quarter rose to $6.7 trillion, the highest level since 2008, as homeowners taking advantage of record-low borrowing costs to refinance their loans brought cash to the table to pay down principal. The 7.3 percent gain was the biggest jump in more than 60 years, according to an analysis by Bloomberg…