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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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From: Ramsey Su7/23/2005 10:35:45 AM
  Read Replies (2) of 110194
 
Is there a change in the mortgage world?

Once upon a time, there were the S&Ls. They were the primary source for mortgages, some for their own portfolios and some in the secondary market to the GSEs. Then came the S&L fiasco and by the time RTC sunsetted out of existence in 1992 (or 1993), the S&L industry went with it.

The big benefactor was the GSEs which became the funding source by default, replacing all the S&Ls.

Now the cycle is changing once again. We know both FRE and FNM have been reducing their portfolios, voluntarily or involuntarily. We know CFC did not sell a bunch of loans last qtr, was that their intent? We know AHM, WM and other all have an excellent qtr attributed to home mortgages.

It appears that a shift away from GSEs has to be occuring right now. Shelby's proposal, regardless of when and which version be adopted, will diminish the roles of the GSEs.

Who are the replacements and what would be the impact?

Would the change cause rates to go up or down or have no impact at all?

Would that impact the mortgage insurance industry since the GSEs are big customers? Would more lenders use the piggyback method to essentially be self insured and keep the profits from the premiums themselves via a higher rate for the jr liens?

Would foreign buyers of asset-backs demand a higher rate if they do not have the implied government guarantee?

Lots of questions and no answers (not from me anyway).
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