Expert Insights into the Changing MBS Market

Several market experts have discussed these topics. Mortgage Bankers Association (MBA) Distribution and Capital Markets Conference and Expo 2023 in New York.

buyer side

Steven Abrahams, Senior Managing Director Amherst Pierpont Securitiesis a broker-dealer owned by Santandersaid that prior to the global financial crisis, investment portfolios seeking the risk and return of MBS assets dominated the market.

After the crisis, however, the Fed entered the MBS market and new regulations encouraged banks to hold high-quality liquid assets, including MBS.

“What we are currently looking at is the early stages of these two policy investors exiting and the return to marginal prices in the market with portfolios that are basically in the game to make a profit. ‘” Abrahams explained. “This is the easiest way to think about why spreads have widened so much.”

Byron Boston, CEO and Co-Chief Investment Officer Dynex Capital Co., Ltd. He said MBS continue to be attractive to wealth managers because “leverage returns are very attractive today” and there is a “great demand for income.”

“A 30-year fixed-rate mortgage is insane,” Mr. Boston said. “But because our government is involved in it, all of us, American citizens, have the pleasure of enjoying it.”

seller side

Panelists said affordability remained an issue, which would reduce production and impact MBS supply. The MBA expects trading volumes to fall from the $4 trillion level in 2020 and 2021 to less than $1.8 trillion this year.

According to agency MBS head of research, Gina Curro, bank of americaMortgage rates are still very high and those who chose very low mortgage rates during the pandemic are “locked out of their homes”.

“We are projecting about $268 billion annually. [MBS] Published online. Last year it was about $535 billion,” Curro said.

Secondary market experts have not seen the turmoil caused by the sale of MBS securities once held by failed banks.

of Federal Deposit Insurance Corporation (FDIC) decided in early April to sell its $114 billion MBS holdings after it took control of a failed regional bank. signature bank and Silicon Valley Bank (SVB). black rock financial market advisory I have led the sales process.

Curro said BlackRock has wisely executed a strategy of keeping its product size low and constant while actively communicating with the market.

“Beyond the mortgage market, the bigger turmoil I want to worry about is that we’re doing this in a global system with a lot of risk,” Boston said. “If, in addition to this, another risk event occurs while we are trying to solve the banking problem from the market, we will face an even bigger problem.”

Mr Boston added: “These are really good assets.

Speaking of the Fed’s MBS portfolio, Curro said, “I think the more likely outcome is that the QT will end by the end of the first quarter of 2024, but this is Bank of America’s That’s the economist’s view,” he said. [quantitative tightening] will come to an end, and at that point all they will probably do is write off their mortgage payments and reinvest them in Treasuries. ”

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