MBS

Bond credit enhancement has benefited from historically higher-than-average prepayment speeds and low realized losses despite a COVID-related rise in delinquencies.

As new Chief Executive Officer Ulrich Koerner seeks to move past two years of scandals and losses that have shaken the bank to the core, the era of the SPG may finally be ending.

Notes are slated to mature on June 25, 2042, and the mortgages are financing property types like one- to four-family residences and planned unit developments.

The success of the seasoned loan pool depends on the servicer’s expertise in handling prescriptive HUD deadlines and procedures for filing claims.

Although the mortgage collateral was short on full documentation underwriting, the borrowers in the pool have high incomes and plenty of liquid reserves.

Borrowers in the pool are well off, with median annual income of $315,283, non-zero weighted average (WA) asset reserves of $406,325 and high residual income.

The home prices of the pool are 9.2% above a long-term sustainable level, compared with 9.2% nationally as of April 2022, down 1.4% since last quarter.

Purchasing mortgage-backed securities—and that strategy is not out of the question as the central bank works to promote equilibrium in the housing markets over time.

Virtually the entire portfolio, or 92.2% of the collateral pool, was underwritten using personal and business bank statements, or profit and loss statements.

The Federal does not plan to reinvest maturing securities, so if maturing balances are lower than those being capped, then the runoff pace might be slower.