Confederation of industry associations — including American community housing finance company (CHLA), National Association of Realtors (NAR), and American Independent Community Bankers (ICBA) — On Thursday, he called on the Biden administration to make cuts to historically large policies. spread Between the 30-year mortgage rate and the 10-year US Treasury bond.
The industry group noted that the spread is more than 300 basis points (bps) compared to the historical norm of about 150 basis points (bps).
CHLA, NAR, and ICBA believe that action is critical to address homeownership affordability and financing challenges and reduce servicers’ impediments to loss mitigation efforts to keep defaulting borrowers in their homes.” CHLA, NAR and ICBA said in a letter to Director Lael Brainard. national economic counciland Secretary Janet Yellen. Ministry of Finance.
To this end, CHLA, NAR, and ICBA: federal reserve The policy is to maintain an inventory of mortgage-backed securities (MBS) and suspend outflows until liquidity and the spread between 30-year fixed-rate mortgages and 10-year U.S. Treasuries stabilize.
Since the central bank’s anti-inflation campaign began in March 2022, the Fed has allowed up to $60 billion a month in Treasury securities and $35 billion in MBS to mature and be withdrawn from its holdings to reduce its balance sheet. It’s here.
Because the Fed’s holdings are constantly being eroded by outflows from repayments and payouts, industry groups argued that the Fed should at least buy MBS to offset outflows.
“Resuming activities to support demand for 30-year MBS and lowering the currently artificially inflated 30-year MBS yield is an important step in the Fed’s overall actions to raise short-term interest rates and combat inflation. “This does not detract from the impact. Similarly, MBS purchased with the current 6% coupon will be much easier to liquidate than with the 1% to 3% coupon purchased two years ago,” the industry group wrote. ing.
The administration also amended the Preferred Stock Purchase Agreement (PSPA) to fannie mae and freddie mactemporarily create your own MBS and/or Ginny Mae They said in their letter that they would provide MBS for a defined period of time.
“Our group simply calls for action to address the liquidity strain in the MBS market through the purchase and retention of 30-year fixed-rate mortgages.”
These measures to narrow spreads will reduce mortgage rates by 100-150 bps, the letter added.
As mortgage interest rates soar, housing industry organizations Mortgage Bankers Association (MBA), N.A.R. National Home Builders Association (NAHB) – Urged central banks to: Provides market certainty regarding interest rate paths.
In a letter to the Federal Reserve Board of Governors earlier this month, housing industry groups asked Fed Chairman Jerome Powell to make two clear statements. The Fed is not considering further rate hikes. And the Fed won’t sell its MBS holdings until the housing finance market stabilizes and the spread between mortgages and the Treasury normalizes.
The agencies noted that these actions provide greater certainty to the market about the Fed’s interest rate path and plans for MBS portfolios, reducing volatility for traders and investors.
