And the beat goes on. Fannie Mae has reported issuing $42.7 billion in MBS in July, showing an increase of 6.4% from June production. In comparison, Fannie’s kissing cousin, Freddie Mac, is showing a month-to-month decline.
While Fannie does not break out purchases of refinanced loans in its monthly reports, its monthly report shows MBS issuance slowly rising from May, clearly based on the recent surge in refinancing applications. As reported by the Mortgage Bankers Association, by the end of July, refinancing applications hit a 13-month high. Since these applications would then show up in MBS issuances in August and September GSE reports, we can assume that more good news is around the corner as this trend continues for the short term.
And where is this product going? Well, the ice cold grip of the MBS investor may be starting to thaw. MBS, especially those paying higher rates of interest than comparable Treasurys (currently at about 150 basis points over), are being looked at by the MBS investor needing to invest cash and take advantage of the higher yields. Given the cleaner underwriting standards for the underlying product, together with prepayment speeds reportedly being somewhat flat, investors may be willing to put more than a toe in the market pool. And though roughly 25% of all outstanding mortgages are reported to be under water with a national delinquency rate of just under 10%, it appears from industry figures that mortgagors are continuing to pay their loans even though they are under water. This is in spite of the fact that these borrowers may not be able to refinance because they have no equity, or cannot qualify for a modification.
So, it appears that the two porch dogs that people have been liking to kick these days appear to be doing what they are suppose to do. Which is to watch out for the old homestead.
No comments:
Post a Comment