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Strategies & Market Trends : John Pitera's Market Laboratory
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To: John Pitera who wrote (8086)8/7/2007 1:55:40 AM
From: Hawkmoon  Read Replies (1) of 33421
 
And executives at Fannie Mae, the government-sponsored entity that along with Freddie Mac provides funding for home loans, asked the companies' government overseer to raise the maximum amount of home mortgages and related securities Fannie can hold in its investment portfolio. The goal would be to boost demand for mortgages in general, proponents of the idea said.

Boost demand for mortgages?.. or Make Fannie Mae up to be the buyer of last resort for mortgage loans being dumped by the commerical banks?

It's interesting that the 10 year bond is sub-5%, but we're seeing mortgage rates fluctuating so severely last week that it would seem that 10 year rates decreasing would put a bid under mortgage rates (to decrease as well).

I'm not much of a bond person so I really don't fully understand the mechanics of how the government, commercial, and mortgage debt markets intertwine. But I have to believe that someone dumping mortgage debt in exchange for lower yielding T-bills is a situation the Fed must be concerned about.

And eventually this disparity has to be resolved by higher T-bill rates caused by people selling to buy higher yielding mortgage debt.

Does Fannie Mae stand to make a killing from being the buyer of last resort in the mortgage markets?

Hawk
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