Reports surfaced last week that the Federal Home Loan Banks purchased the entire $46.25 million triple-A-rated A1 class of Conseco Finance 2002-2 manufactured housing paper, leading to speculation over the future investment strategies of the government-sponsored entities. With mortgage rates expected to continue declining and agencies feeling the pressure to find yield in alternative investments, sources speculated that the troubled manufactured housing sector will see increased interest from the government-sponsored entities.

While unconfirmed, buyside talk that the purchase of triple-A Conseco manufactured housing paper had some participants theorizing that this was the first step in familiarizing themselves with the collateral, prior to making a push into that sector. Mike Ciota, in the FHLBanks Office of Finance would only confirm that the bank's $200 billion-plus investment portfolio "contains several billion of manufactured housing securities, all rated triple-A, which is permitted in the charter."

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