Thursday, January 19, 2012

You pay more for your mortgage so MBS prices improve? Thanks Government!?

From today's Rob Chrisman email. Clearly the change in pricing coming down the pipe is starting to wake up most of us originators. Frankly, this is no different than a business increasing prices to improve margins or cut losses. But in this case, since the government is there to prop up the market I am failing to see the point...Unless you read below.

Some Wall Street MBS analysts believe that it is likely that the g-fee needs to increase by another 15-45bp over the next two years (on top of the 10bp increase) if the FHFA changes g-fee level such that it reflects the risk of loss as well as the cost of capital allocated to similar assets by other fully private regulated financial institutions as required by H.R. 3630. The analysts note that conventional securities could be worth .375-.625 more because of g-fee increase's impact on current production, and older securities could be worth 1.5-2.0 points more since it will be more expensive to refinance, so fewer will do it, meaning that the securities are on the books longer.





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