Banks Uncover Loophole to Buy Home Loans at Below-Market Prices
- Lenders stand to profit by buying loans out of Ginnie bonds
- The delinquent-loan purchases would hurt MBS investors
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Banks and other lenders have found a way to potentially make billions of dollars from the coronavirus-fueled upheaval in the U.S. mortgage market -- yet it risks burning bond investors in the process.
The earnings would come from an unanticipated side-effect of Congress’ decision in March to allow homeowners affected by the pandemic to delay loan payments for as long as a year, combined with arcane regulations governing mortgage-backed securities.