Supersized Mortgages Are Making the Agency MBS Market Riskier
- Quicker Fed taper, larger limits mean loans get bigger
- Borrowers with larger mortgages more sensitive to rate falls
Photographer: Bryan Tarnowski/Bloomberg
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The loans that are bundled into government-backed mortgage bonds are getting supersized as homes grow more expensive, a change that could weigh on the performance of the securities next year.
The Federal Housing Finance Agency said last week that loans that can be bundled into agency mortgage bonds can be as big as $647,200, an increase of nearly $100,000 from the year before. While that limit rises annually based on average U.S. home prices, it’s the largest ever increase in absolute and relative terms.