Feds Cutting Back on MBS Purchases

04/11/2017
 
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The word on the street is that the Feds are cutting back on MBS purchases which could me rates will climb even higher.

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  • Are you finally starting to get it?

    The mortgage Industry’s miraculous recovery since 2012 has been nothing but a farce; nothing but a temporary reprieve from the collapsing card-house of 2008.

    You see, by purchasing $1.75 Trillion of mortgage backed securities (MBSs) that were originated before the 2008 financial crisis the Fed was able to provide much-needed liquidity to the secondary mortgage market.
    This was the Fed’s “cure” to the loan industry’s self-inflicted cancer.

    Now, 5-years later, the Fed HAS to get these MBSs off of their balance sheet and sell them back to wall street.

    So ask yourself, if you were a MBS investor, where would you rather put your investment dollars;

    A. low-risk, low LTV mortgages from pre-2008, yielding 6%+, that the government is liquidating

    Or

    B. High-risk, high LTV, newly-originated mortgages that are yielding 4%?

    If you answered A, you are correct.

    Next question:

    What would current mortgage interest rates have to be increased to before you, as a MBS investor, would ever consider putting your investment $ into? 7%, 8%, 9%?

    Whatever the mortgage market’s answer is to THAT question is what mortgage interest rates will rise to once the FED starts the great MSB liquidation sale.

    So yeah, you better start recruiting loan officers by the truck load. Because once interest rates start ramping up close to 6%, the mass exodus of loan officers from the industry is going make 2008 look like a garden party.

    Double Real Estate Bubble April 11, 2017 10:06 am Reply

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