Fed’s Plan for Balance Sheet

2018-01-02T18:46:34+00:00 May 25th, 2017|Categories: Uncategorized|Tags: , , , , , , , |

During the quantitative easing years of 2008 through 2014, the Fed acquired trillions of dollars of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities (Agency MBS) and U.S. Treasuries. Its balance sheet grew from under $1 trillion to over $4 trillion. The Fed stopped adding to its holdings a few years ago, but has maintained a policy to reinvest principle payments received, thus maintaining a steady level of investments. At times over the last few years when refinance activity was high and the Fed was reinvesting the principle payments it received, the Fed was the buyer of the vast majority of all newly issued Agency MBS. Even recently, the Fed has been the buyer of approximately 25% of newly issued Agency MBS. The demand from the Fed for Agency MBS has had a positive effect on mortgage rates. For the past few months, Fed speakers have been saying that the time to begin “normalizing their holdings was near. But few details were provided.  The minutes of the Fed’s May 3nd meeting, released on May 24th, provided some details about their plan. Although many details remain unknown. The plan calls for the Fed to tell investors the maximum amount it [...]

BlogTalkRadio Podcast – May 3, 2010

2017-12-20T17:34:18+00:00 May 5th, 2010|Categories: BlogTalkRadio Podcasts|Tags: , , , , , , , , , , , , , , , , , , , , |

“Skin in the game.  Most mortgage bankers, especially those who have experienced a loan buyback, feel like they have some.  If Senate bill S3217, Restoring American Financial Stability Act, is passed in its current form mortgage bankers will learn what “skin in the game means to the current Administration.  This bill calls for mortgage bankers to retain the risk on 5% of the loans they originate.  The language in the bill is not clear, but some have suggested that retaining risk means funding a reserve with cash.  Lets do some math.  If a mortgage company is really efficient, it might earn 1% on the loans it originates and sells.  If they are required to hold 5% as a risk reserve, it will not take long for mortgage bankers to originate themselves into bankruptcy.  Who would participate in this business? Glen Corso, Managing Director of Community Mortgage Banking Project, joined the show today to discuss his efforts to lobby the Senate to add an amendment to the “skin in the game provision of S3217.  The amendment would exclude “well underwritten loans from the risk retention requirement.  Think Ginnie, Fannie, or Freddie loans.  They cannot be defined that way because we may [...]