Fannie and Freddie ramping up sales of new type of RMBS

Mortgage-backed securities would save taxpayers billions in losses in a housing downturn

TRD New York /
Dec.December 29, 2015 01:00 PM

With the goal of saving taxpayers billions of dollars in losses in the event of another mortgage crisis, Fannie Mae and Freddie Mac are planning to ramp up the sale of new types of securities that would transfer potential losses in a housing downturn to private investors.

The securities, called Connecticut Avenue Securities by Fannie Mae and Structured Agency Credit Risk by Freddie Mac, are essentially residential mortgage-backed securities – bonds whose performance is tied to that of a pool of mortgages.

If the mortgages default, investors in the bonds could lose some or even their entire principal, according to the Wall Street Journal. But proponents of the securities see them becoming a mainstay of the bond and housing markets, and possibly even entering major bond indexes.

The sales of the securities are notable because issuances of residential mortgage-backed securities, which also give private investors exposure to the mortgage market, are doing poorly.

But for investors who are still looking to take such risks in the residential mortgage market in search of yields, the new Fannie and Freddie securities are their only outlet.

“Right now, the [securities] are almost the only way for investors to get exposure to new residential mortgage-credit risk,” Deutsche Bank mortgage analyst Steven Abrahams said. [WSJ]Rey Mashayekhi


Related Articles

arrow_forward_ios
Housing and Urban Development Secretary Ben Carson (Credit: Getty Images, iStock)

HUD wants to jumpstart bank lending on low-income homes

Lenders issued the most mortgages in 14 years last quarter (Credit: iStock)

Nonbank lenders could give serious boost to cooling housing market

The number of closed sales fell by more than 14 percent year over year in the third quarter (Credit: iStock)

Low mortgage rates are killing Manhattan’s all-cash buyer

Cammeby's International Group founder Rubin Schron and, from top: 194-05 67th Avenue, 189-15 73rd Avenue and 64-05 186th Lane (Credit: Google Maps)

Ruby Schron lands $500M refi for sprawling Queens apartment portfolio

1735 York Avenue and Bonjour Capital's Charles Dayan (Credit: Google Maps)

Dayan’s Bonjour Capital inks $115M refi for Upper East Side building

US home mortgage debt surges past pre-recession record

US home mortgage debt surges past pre-recession record

(Credit: iStock)

Despite housing market slowdown, mortgage lenders just had a great second quarter

The Daily Dirt: The dark cloud hanging over buyers

The Daily Dirt: The dark cloud hanging over buyers

arrow_forward_ios
Loading...