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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (55843)	4/13/1999 3:32:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 132070

Mike, >>Wayne, But the last bailout is what is hurting Fannie's spreads.<< Explain? On the market value of the existing portfolio or on new purchases? As a continuation of this question, haven't mortgage rates risen since the Fed bailout last year? If FNMA is borrowing short (while that strategy may be questionable) aren't they generating a larger spread since the bailout or have their short borrowing costs risen even more?

To: Freedom Fighter who wrote (55843)	4/13/1999 5:51:00 PM
From: Knighty Tin	Respond to of 132070

Wayne, Both the old portfolio and the new. By overcutting rates, AG reduced the amount Fannie can charge for a new mortgage. However, they also brought all the variable mortgage returns down with one swell foop. As with most mortgage lenders, Fannie tends to lend variable at the top and fixed near the bottom. In addition to making existing and new assets pay less, the spread between Treasuries and agency paper widened tremendously during this period. Which means that Fannie does not get the full benefit of the rate cut on the cost of its funds. So they get squeezed by getting the full loss of lower rates, but not the full lower cost. Which is why they only had a 12% eps gain while increasing assets at a much greater rate.