UPDATE: from FHFA (Federal Housing Finance Agency)
The FHFA announced this morning that it will allow Fannie Mae and Freddie Mac to engage in “additional” dollar role transactions to inject more liquidity into the MBS.
In short, the dollar role provides short-term liquidity for MBS issuers when they are having problems delivering their mortgages to the finale investor. In this case, if an issuer/bank has a contract to sell MBS to a private investor on a date and can’t deliver (e.g., no investors for a variety of reasons such as a divergence between the rates on mortgages and those investors are willing to take), the Enterprises temporarily buy the MBS for a short period until the ultimate investors can take hold. Normally, another private investor would provide this function, but they have dried up.
Since this is a temporary transaction with a designated, non-Enterprise buyer at the end of the bridge period, the GSEs are expanding their portfolio for a very short and limited period. In addition, they are making money on the MBS the roll in the short-term.
The gist is that this will help to ease mortgage rates and take stress of banks/issuers.
The FHFA has been busy this morning and made a SECOND ANNOUNCEMENT. The FHFA:
- Will allow the GSEs to expand their use of automated appraisals,
- Allow lenders to obtain income verification via email, a recent year-to-date pay stub from the borrower, or a bank statement showing a recent payroll deposit if the information can’t be gained by phone
Both changes are an effort to help the mortgage transaction.
Currently, mortgage rates have jumped in part due to problems in capital markets and in part due to a logjam of loans due to a REFI boom trying to get through, while appraisers have pulled back. This change helps to alleviate that log jam and should help to ease rates in time in conjunction with the Fed’s MBS buying efforts. Likewise, the income verification changes will help in areas where local offices are closed.
National Assn of REALTORS