CHLA, ICBA Ask For Action To Bring Down Mortgage Rates
The Community Home Lenders of America (CHLA) has joined with the Independent Community Bankers of America (ICBA) in asking U.S. Treasury Secretary Scott Bessent and Federal Housing Finance Agency Director Pulte to allow Fannie Mae and Freddie Mac to reduce mortgage rates by buying Mortgage-Backed Securities (MBS) issued by the GSEs and Ginnie Mae.
“It is time for bold action to help today’s young families afford homeownership, and having the GSEs buy MBS would be both effective and prudent,” said Scott Olson, Executive Director of CHLA. “We are proud that the two pre-eminent national associations representing community lenders have joined together to ask Treasury and FHFA for action to bring down mortgage spreads back to historical levels.”
Such an action would provide key support for the US MBS market and narrow the spread between the 30-year fixed rate mortgage and 10-year Treasury bond rate, currently at 222 basis points, and well above the historic norm of 140-170 basis points.
This authority would allow the GSEs to buy MBS only when the spread was elevated about 170 basis points, and would be capped at $300 billion for each GSE. Such a policy could reduce the cost of a mortgage by up to 30-35 basis points, a meaningful interest reduction that would help more young families and boost overall US growth accordingly.
This authority would not replicate prior GSE retained portfolio policy, whereby until 2008 the GSEs had unlimited authority to buy MBS at any time, without any cap.
In addition, the GSEs today have existing retained portfolio caps of $225B each, and yet together have used only $204B of this existing authority. Fannie Mae and Freddie Mac could immediately boost their MBS holding by an additional $246B under existing rules.
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