Fannie and Freddie add $12.5B MBS in January, help to ease rates

"Fannie Mae and Freddie Mac added a combined $12.5 billion in agency mortgage-backed securities (MBS) to their retained portfolios in January, a volume that BTIG analyst Eric Hagen described as lower than expected but still effective in helping to drive down mortgage rates. During a Jan. 21 speech at the World Economic Forum in Davos, President Donald Trump said he had directed the government-sponsored enterprises (GSEs) to purchase up to $200 billion in MBS."

"Mortgage rates were 6.20% before the announcement, versus 5.95% currently, which we attribute roughly to: 15 bps of lower benchmark 10-year Treasury rates, 5-10 bps of tighter MBS spreads in the secondary market, and slightly lower/tighter profit margins for lenders, Hagen wrote in a report."

"Under their senior preferred stock purchase agreements, each GSE can hold up to $225 billion in mortgage-related assets. That compares to current portfolio balances of $143.5 billion for Fannie and $158.7 billion for Freddie. The remaining headroom could prove supportive during a refinance wave, when mortgage rates tend to lag declines in benchmark rates."

Fannie Mae and Freddie Mac combined to add $12.5 billion in agency mortgage-backed securities to their retained portfolios in January, with Fannie Mae purchasing $8.5 billion and Freddie Mac $4 billion. This action followed President Trump's directive for the GSEs to purchase up to $200 billion in MBS. The purchases helped reduce mortgage rates from 6.20% to 5.95%, driven by lower Treasury rates, tighter MBS spreads, and reduced lender margins. MBS-Treasury spreads compressed to approximately 105 basis points from 115 basis points prior to the announcement. Both GSEs maintain significant portfolio capacity under their agreements, with Fannie Mae holding $143.5 billion and Freddie Mac $158.7 billion against individual limits of $225 billion.

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