After posting their worst returns since 1999, government-backed mortgage bonds are starting 2013 with losses on speculation the end of Federal Reserve purchases is in sight and as homeowner refinancing roils the market.
President Barack Obama is escalating the fight over how to revive the housing market, a sector of the economy that has dragged down growth for six years running, eroded consumer confidence and wiped out $7 trillion in American wealth.
Freddie Mac’s decision to force Bank of America Corp. to repurchase $330 million of mortgages from its securities may result in a profit for the lender while triggering investor losses, according to Credit Suisse Group AG.
Prices in the market for Fannie Mae and Freddie Mac mortgage bonds are incorrectly forecasting a 55 percent chance of a “government-induced refi spike” in the next year, according to Credit Suisse Group AG.
Annaly Capital Management Inc. is clawing back from its worst quarterly performance in more than 7 years as the largest real estate investment trust that buys mortgage debt seeks to sidestep the U.S. Federal Reserve’s interference in credit markets.
Yields on Fannie Mae and Freddie Mac mortgage securities that guide U.S. home-loan rates set record lows after the Federal Reserve said it would buy more U.S. government debt as its housing-bond holdings pay down.
Bank of America Corp. yesterday struck deals to settle lending complaints, sell rights to service $300 billion of mortgages and repair relations with regulators. For Chief Executive Officer Brian T. Moynihan, it offers his best chance to rebuild the home lending business.
Lenders could lose $168 billion if banks sell loans into the Public-Private Investment Partnership at market prices instead of their balance-sheet valuation, Jamie McGee and Margaret Chadbourn of Bloomberg News report, citing estimates in regulatory filings.