Could New Rules for Fannie Mae and Freddie Mac Lower Mortgage Rates?
✉️ Want to forward this article? Click here.
On Monday, the Federal Housing Finance Agency enacted new rules to standardize how mortgage giants Fannie Mae and Freddie Mac operate. And those changes could benefit homebuyers.
Fannie Mae and Freddie Mac guarantee mortgage loans through the bond market, by consolidating and issuing mortgage-backed securities for investors. However, as Bloomberg reports, investors approach the two mortgage servicers very differently.
"Since mid-2011, Fannie Mae has accounted for well over 80 percent of the trading volume in 15- and 30-year mortgage pools, according to data compiled by Oppenheimer & Co.," the article states. "The relative lack of liquidity in Freddie Mac bonds has meant that they have traditionally traded at a discount to comparable Fannie Mae securities, and Freddie Mac has long paid a subsidy to mortgage originators to push for market share."
story continues below
loading...story continues above
The new rules would create more parity between how the two agencies give payouts to investors, requiring that Freddie Mac join Fannie Mae in making payouts in 55 days rather than 45 days. Consequently, the mortgage pools for both agencies will be lumped together as uniform mortgage-backed securities. Theoretically, this will enable more investments to be traded every day and lower the returns on the bond, potentially lowering interest rates for homebuyers.
Consolidating both into one securities pool would also compensate for differences in how investors approach each servicer's anticipated mortgage prepayments, as securities are valued differently based on the extent to which prepayment is expected.
Some critics are concerned that this change will actually increase mortgage rates, however, as prepayment speeds may still affect how investors treat mortgages. The single pool would not prevent investors from being able to pick which servicer's mortgages to back, potentially causing divergence between Fannie Mae, Freddie Mac, and the general UMBS pool and reducing liquidity overall. Less attractive loans could also be packaged together and make prices lower overall for UMBS, resulting in higher mortgage interest rates.
See other articles related to: fannie mae, freddie mac, mortgage lending, mortgage rates, mortgages
This article originally published at https://dc.urbanturf.com/articles/blog/could-new-rules-for-fannie-mae-and-freddie-mac-lower-mortgage-rates/15477.
Most Popular... This Week • Last 30 Days • Ever
![Buying with Friends: What You Should Know](https://assets.urbanturf.com/dc/images/blog/2010/05/home_value.jpg)
Here are some precautions to take before buying real estate with a buddy.... read »
![$10 Million McLean Home Of Former Nationals Star Stephen Strasburg Finds a Buyer](https://assets.urbanturf.com/dc/images/blog/2024/09/resized/VAFX2180246_45_0_image_560x420.jpg)
The six-bedroom home listed for just south of $10 million back in June went under con... read »
![16-Story, 325-Unit Building Pitched For Arlington's Wilson Boulevard](https://assets.urbanturf.com/dc/images/blog/2024/09/resized/2500-wilson-1_image_560x420.jpg)
The new project will take the place of an obsolete office building in Courthouse.... read »
![Mayor Bowser Announces First Office-To-Residential Projects To Receive Tax Abatements](https://assets.urbanturf.com/dc/images/blog/2024/09/resized/1625-mass-1_image_560x420.jpg)
The three office-to-residential conversion projects have been conditionally awarded t... read »
![500 Apartments, Live/Work Units And A Park: The New Plans Coming To St. Elizabeths](https://assets.urbanturf.com/dc/images/blog/2024/09/resized/parcel-6-park_image_560x420.jpg)
The plans for one of the final parcels at DC's St. Elizabeth's East campus are beginn... read »
- Buying with Friends: What You Should Know
- $10 Million McLean Home Of Former Nationals Star Stephen Strasburg Finds a Buyer
- 16-Story, 325-Unit Building Pitched For Arlington's Wilson Boulevard
- Mayor Bowser Announces First Office-To-Residential Projects To Receive Tax Abatements
- 500 Apartments, Live/Work Units And A Park: The New Plans Coming To St. Elizabeths
DC Real Estate Guides
Short guides to navigating the DC-area real estate market
We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Start browsing below!
First-Timer Primers
Intro guides for first-time home buyers
Unique Spaces
Awesome and unusual real estate from across the DC Metro