Wall Street is throwing itself into the mortgage-to-bond business, creating new competition in the long-dominant market for state-funded mortgage giants Fannie Mae and Freddie Mac.
The so-called home-brand mortgage market, in which financial companies act as intermediaries to create huge pools of loans and sell them to investors, raised more than $ 42 billion in the second quarter. This is the highest since the start of the pandemic and nearly every quarter since the last financial crisis, according to industry research firm Inside Mortgage Finance.
This market accounted for only 4% of all mortgage bonds issued in the previous quarter. Fannie Mae and Freddie Mac continue to be key players in the industry, issuing federal bonds that guarantee payments to investors.
However, mortgage investors expect the private market to continue to grow as a vault for loans that Fannie Mae and Freddie May cannot or cannot buy. Recent issuers include Goldman Sachs Group Inc., Morgan Stanley, JPMorgan Chase and Company, as well as a growing number of banks and real estate companies.
With liquidity rising in recent months, the home brand market has intrigued more money managers looking for bottoming-out returns. Private label securities usually offer higher yields than securities issued by Fannie Mae or Freddie May, as there is no government guarantee that the money will be paid to investors.
New pursuit of mortgage-backed securities to avoid Fannie Mae and Freddie May
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