Recursion released the roaster of TOP 10 GNM issuers and GSE lenders of March 2022.
Mortgage issuers delivered 183K loans for a combined $47B to Ginnie Mae program. Issuance volume dropped $2B from February 2022. Here’s a list of top 10 GNM mortgage issuers. The fourth quarter of 2021 marked the 13th anniversary of the introduction of the Federal Reserve’s Quantitative Easing (QE) policy, whereby the central bank worked to push longer-term rates lower once short-term rates hit the zero lower bound. This activity largely took place via purchases of longer-dated Treasury securities and mortgage-backed securities. There were many nuances as the central bank bought securities in different proportions over time and occasionally let their balance sheet shrink as the securities they held paid off or matured.
The purpose of this note is to take a big-picture view of the MBS market impact of a likely decline in Federal Reserve holdings in the Agency space as the central bank has recently indicated its intention to begin letting these securities run off its balance sheet. In particular, the FOMC statement of March 16 stated, “In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting.[1]” Which we guess will be in May. What does this mean to valuations in the MBS market? Our analysis is based on the data collected on Agency MBS ownership broken down by major investor class by the Federal Reserve in the Financial Accounts of the United States[2]. This data is produced quarterly and is a broad measure of Agency securities, including not just single family Agency MBS but also Multifamily MBS and Agency Debt. Below find a chart of the progress of the Agency MBS market from Q4:2008, when the Fed launched QE, through Q4:2021. The chart nicely shows the ebb and flow of activity in this market on the part of the major players. The holdings controlled by the central bank is one example, starting at near-zero in Q4:2008 and cycling up and down, reaching a record high of almost 25% at the end of 2021. On December 30, 2021, FHFA announced that the baseline conventional loan limit for 2022 would rise by $98, 950 to $647,200.[1] The new ceiling for high-cost areas is set at 150% of the baseline limit or $970,800. Since loan limits apply when they are delivered to the agencies, not when they are originated[2], it would be of interest to look at the pace at which loans reaching to the new limit are delivered at the start of the year.
The chart below shows the distribution of mortgages delivered to the GSE’s in Q1 2021 by loan size($K). Recursion released the roaster of TOP 10 GNM issuers and GSE lenders of January 2022.
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