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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (22072)	11/20/2004 12:31:01 PM
From: ild	Read Replies (2) \| Respond to of 110194

In October, Fannie Mae's mortgage portfolio grew at an annual rate of 12.2%, bringing its year-to-date growth overall to 2%. The mortgage portfolio stood at $913 billion at end-October. October mortgage portfolio purchases were $27.1 billion, and included a higher proportion of hybrid adjustable rate mortgages and triple-A Libor floaters. This reflects a continued shift in mortgage originations, as rising home prices have led many homebuyers to turn to ARMs and interest-only mortgages to maintain affordability on their monthly payments, Fannie Mae said. That in turn has a "discernable effect on our net interest yield and net interest margin...which declined sequentially in each of the past two quarters," it said. The shift in origination also means that for the first time ever in the third quarter, private-label mortgage-backed issuance, such as home-equity backed deals, accounted for over 50% of total mortgage-backed issuance, outpacing the combined issuance of Fannie Mae, Freddie Mac (FRE) and Ginnie Mae, the Congressionally-chartered housing finance agencies. It noted that 75% of the mortgages backing private label MBS in the third quarter were ARMs. The sustained high level of ARM origination has resulted in financial institutions retaining mortgage loans. Also, a reduction in available mortgage- backed securities in the secondary market has driven prices higher in mortgage- backed market. Fannie Mae noted that generally slower growth in its own outstanding mortgage- backed securities since March this year "reflects both the reduced availability of MBS and Fannie Mae's belief that current market pricing does not adequately compensate for the level of credit risk in many private label securities." Separately, Fannie Mae also said that its duration gap, which measures the balance of cash inflows and outflows on its assets and liabilities, was zero months in October compared with negative two months in September.