The Office of Federal Housing Enterprise Oversight, Fannie Mae and Freddie Mac have made a major initiative to increase liquidity and support the U.S. mortgage market. The move is expected to offer up to $200 billion of immediate liquidity to the MBS market. OFHEO projects that two GSEs' existing capabilities along with this new initiative and the release of the portfolio caps announced in February, should allow the GSEs to buy or guarantee about $2 trillion in mortgages this year. This capacity will permit them to do more in the jumbo temporary conforming market, subprime refinancing and loan modifications areas. OFHEO announced that it would now permit a considerable portion of the GSEs' 30% OFHEO-directed capital surplus to be invested in mortgages and MBS. As part of this move, both companies announced that they will start raising significant capital. The agencies also said they would maintain overall capital levels well in excess of requirements while the mortgage market recovers. OFHEO will also immediately reduce the existing 30% OFHEO-directed capital requirement to 20%, and will consider further reductions in the future. This move by the OFEO will free up $2 to $3 billion in excess capital and will result in the GSEs having a significant capital cushion over the new 20% regulatory requirement, which eventually should drop to 0%, according to Morgan Stanley equity analysts. With excess capital, Fannie Mae and Freddie Mac might be able to buy as much as $100 billion or more in MBS. However, Morgan Stanley expects spreads to compress on the announcement of this deal, thus actual purchases by the GSEs would likely be lower. Morgan Stanley analysts viewed this announcement as a positive in terms of allowing faster growth in retained portfolios and net interest income for Fannie Mae and Freddie Mac. It also reduces the probability for the need to raise dilutive common equity if credit losses trend upward. Another positive is that it is a philosophical victory "that reaffirms the mission-purpose of the retained portfolios, which government officials and politicians had called into question in recent years," Morgan Stanley analysts said.
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Broken down by product type, the agency's NJCLASS Standard Fixed product should account for a large majority of the loans, 75.4%. NJCLASS Consolidation will account for the next-largest group, 14.1%.
2h ago -
The notes will price against Treasurys, with spreads expected to fall between 85 and 90 basis points over the benchmark.
11h ago -
The JPMorgan Chase CEO took aim Tuesday at the proposed Basel III endgame rules, hindrances to mergers and bureaucratic burdens. "I would love to have a more productive relationship with regulators, but I think it takes conversation," Dimon said.
April 24 -
Bluegreen Vacation originated the loans and Fitch expressed confidence in its record of good performance as servicer.
April 23 -
Many legal experts think the Supreme Court will rule in favor of the Consumer Financial Protection Bureau in a case challenging its funding. Such a ruling would unleash a flurry of litigation that has been on hold pending the outcome of the constitutional challenge.
April 23 -
Lendbuzz sells the notes as it juggles mixed performance results from 2023. Originations and revenues saw huge jumps, but so did operating expenses.
April 23