New Mortgage Bonds May Prove a Double-Edged Sword for Investors
- Co-mingling GSEs’ home loans could raise quality questions
- Benefits may include increased liquidity, lending efficieny
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The Federal Housing Finance Agency’s plan to combine Fannie Mae and Freddie Mac mortgages into a single security starting in June 2019 promises to bring both benefits and challenges to the mortgage sector.
While liquidity and efficiency may get a boost by merging the output of the government-sponsored enterprises, the quality of loans delivered into the new uniform mortgage-backed securities may decline.