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Strategies & Market Trends : The Residential Real Estate Post-Crash Index-Moderated
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To: Drygulch Dan who wrote (119182)11/21/2022 1:55:03 PM
From: Broken_Clock1 Recommendation  Read Replies (1) of 119358
 
wsj.com

For a while, Bank of America was by far the largest bank buyer. Around the end of 2020 and beginning of 2021, the bank was adding to its mortgage-bond portfolio at almost as fast a clip as the Fed.

By the end of 2021, it had amassed a $979 billion bond portfolio, up from $470 billion at the end of 2019. That included some $622 billion of mortgage-backed securities, $554 billion of which it said it would hold to maturity and $68 billion that it classified as available for sale.

Higher rates arrived this year and scrambled the economics of buying. Banks’ deposits have leveled off and in some cases declined. Loans are growing again. Some banks are also opting to hold mortgages, instead of mortgage bonds, on their books. The 10 largest bank owners of mortgage bonds trimmed their holdings by $133 billion during the first nine months of 2022, including about $53 billion during the third quarter, according to JPMorgan. Much of that decline is from maturing bonds that aren’t reinvested in new ones.

The mortgage bonds have also fallen sharply in price as rates have risen. Bank of America expects to hold most of its existing mortgage bonds to maturity, which would mean it wouldn’t take losses on these investments due to falling prices. But if it did sell now, it would have losses of nearly $100 billion.
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