- 2 days ago
On today’s special breaking episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the announcement late Thursday that Trump has directed Fannie and Freddie to buy $200B in mortgage backed securities to push mortgage rates lower.
Related to this episode:
Trump directs GSEs to buy $200B in mortgage bonds to lower rates
https://www.housingwire.com/articles/trump-gse-mbs-purchase/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate.
Related to this episode:
Trump directs GSEs to buy $200B in mortgage bonds to lower rates
https://www.housingwire.com/articles/trump-gse-mbs-purchase/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate.
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the announcement
00:12late Thursday that Trump has directed Fannie and Freddie to buy $200 billion in mortgage-backed
00:18securities to push mortgage rates lower. This is a special breaking episode, and I want to thank
00:23our sponsor, Trust in Will, for making it possible. Logan, welcome back to this special edition podcast.
00:31Yes, just about before I was about to go on stage today, we get the news that
00:37Trump announced that Freddie and Fannie authorized $200 billion worth of purchase. I think I might
00:47be wrong here. They've already done like $50 or $70 billion already. So I don't know if there's
00:52only $130 billion left on the cap. I might be completely wrong here because it's been a while
00:59since I've looked at what their charter was on this. But if I'm right, they still have like $150
01:05or $130 billion left to purchase off of that. If that's true, then of course, mortgage-backed
01:11securities got a little bit better right off the news. Let's bring some context into this discussion.
01:19Let's bring some context because what people really care about, I think, is like,
01:22what does this mean for mortgage rates?
01:25So the spreads were already getting better. We're only 20 to 40 basis points away from normal.
01:33This isn't like the QE where we're spending trillions of dollars of buying bonds and mortgage-backed
01:41securities. So it's not going to be that type of mortgage market response. My first inclination is
01:49this is also somewhat of a defensive move as well because rates are near 6%. This prevents rates from
01:58really breaking up higher in 2026. Spreads get improved unless the labor data starts to get really
02:04better and wage growth picks up and unemployment. This keeps rates lower for longer. A year ago, you and I
02:11talked about this. What could they do? The Fed's not going to buy mortgage-backed securities. But if they
02:16wanted to, they could have Freddie and Fannie take their excess profits and buy, but I don't know if
02:23that's in the works for the IPO or anything like that. If they wanted to, on top of this,
02:32they could make some changes on LPAs or, as Bolte calls it, pricing on top of this as well. Again,
02:39there's a lot of things going on, midterm elections here. Tax cuts are coming. Oil prices are low.
02:47They want lower mortgages. Remember the whole trinity we talked about in November of 2024?
02:52Lower oil prices, lower mortgage rates, and a lower dollar. And it looks like there's going to be a
02:59big push on this going into the midterms. It's funny because in the earlier podcast, we said,
03:05now that they're trying to ban, you know, investors or institutional investors, there has to be a
03:14demand side equation to this, right? So expect something. And within hours, something was
03:19announced. This is crazy. Yeah. I think it's interesting because you did say in different
03:25podcasts, you've been like, they could change this in a second if they wanted to.
03:28They can change it via a sentence anytime they wanted to. Well, that, you know, a lot of that
03:35was the Fed. If the Fed really wanted to, they could change things if they, but just the headline
03:41of this happening can get it. Now, I just want to get, I just want to make sure there's context into
03:47this, spreads improving as they are. You know, if it does occur with the mortgage-backed security
03:54market, this will be to me like a 2026 story. I don't think this is going to be like policy
04:01every year, but just for this year, it does keep rates lower, especially if 10-year yield is lower.
04:09Now you have a better chance of it getting a little bit better out there. Again, we've not had a sub
04:166% mortgage market world here. So again, always work off the slow dance, the 10-year yield,
04:2330-year mortgage rate. I mean, by the time this podcast comes out, we're going to have jobs Friday
04:27out there. We'll see how the bond market reacts to this. But think of this also as putting some
04:33protection onto the upside, making sure rates stay lower. Don't think of this as kind of QE where
04:40we're just going to trillions of dollars of quantitative easing and bond buying and mortgage
04:45rack securities and stuff. It's not going to be that. To me, it's just extra insurance to keep
04:50things intact going into the midterms. Well, let's talk a little bit about specifics like
04:58what happened right after and what do you expect to happen with spreads when you're like, okay,
05:04they're going to get a little bit better. So does that mean 20 basis points? Does that mean-
05:08Well, I mean, we'll see how the market reacts to this and the 10-year yield. There isn't kind of a
05:13full, the mortgage market is 100% all spreads. There is a difference out here. To me, again,
05:21it's just, you know, when 2024, when bond yields were rising and the 10-year yield spreads were
05:27getting better, it limited the damage to a degree in 2025. So think of it as that. But again, if you
05:36can get the 10-year yield lower now with spreads, what do we say with that? What was the term that
05:43we've used in the last few years? You get the double whammy. The double whammy, yeah.
05:48The whole double whammy in this, you get better spreads and lower yields. There's your sub 6%
05:57mortgage rates. Now, what I've always said, it's really hard for me to get below 5.75 because spreads
06:03have to get normal. If spreads just get to normal 20 to 40 basis today, you're at 5.80 to 6% already
06:11without any help from the 10-year yield. So take a deep breath. I know the headline was crazy and,
06:17you know, I know a lot of people are making, we were on stage with the Romneys, you know, and trying
06:24to talk about this. But again, it's midterms coming up and they're going to do whatever they can to try
06:32to get this going. And lower mortgage rates was something that, you know, was policy here.
06:40Because if more people buy homes, more people move, all this stuff, people feel better. And one of the
06:47problems with having policy restricted for housing for so long is that we did this podcast last year.
06:54Eventually, government's going to step in and do something about it. And I always said the Fed never
07:00read the room as good as they thought. Trump does. So they're putting it guns of Navarone. Everything
07:07goes in out there. This is a more beneficial housing topic than, you know, banning institutional investors.
07:17It will have more of an effect. So I don't really have any context myself for like 200 billion. So
07:23is that like, and you're saying, listen, this is not like QE where it went on and on or.
07:28Yeah, just the headline of that. Yeah. Just the head. Spreads were getting better on their own
07:33anyway. Right. Spreads were getting better on. We were almost back to normal, but without this.
07:39And then you add this onto the variable, it just, it makes it hard for spreads to, to, to go, to go
07:47higher. So again, remember the Ghostbuster thing with the theme we had Lenny, Lenny, all those voters
07:55you're going to save, you know, mortgage rates go lower. Again, that's something that the Biden
08:00administration had to deal with, with higher rates and was, it was very negative for American
08:06households. Now lower rates, lower energy prices. What do we say? Those are two things that people
08:11see, but they pay for, uh, gasoline and now mortgage rates lower and people go, I, I, a little bit more
08:18buying, a little bit more moving, you know, get things going. Uh, um, and that's kind of how we've
08:24done things in America for a very long time. So, uh, Trump reads the room better than Powell, uh, and
08:32others. So this is just, it's not a coincidence. This is all happening kind of all at once. Right.
08:38And we kind of go with that, uh, uh, and see what the market implications are.
08:43What kind of, um, how long lasting is something like this effect on the spreads?
08:50Again, the main point is spreads got better on their own. This is just another factor to help it go a
08:58little bit lower. And also on the days where bond yields go up, this is a very good defensive
09:04mechanism here to keep spreads, uh, uh, uh, limiting the damage on the upside as well. So, uh,
09:11hypothetically speaking, let's say jobs data is good. Unemployment rate goes down, wage growth picks
09:16up, bond yields go up, the spreads limit the damage to a degree as well. So it takes that other variable
09:21out of the equation about higher rates and what can happen with demand because you, you, you keep that,
09:27uh, lower rate, uh, theory in there. Of course, if the 10 year yield shoots right up higher,
09:31there's only so much the spreads could help out. I mean, the slow dance is there, but,
09:36but yeah, uh, um, we talked about this in the earlier podcast today. Now that they did that,
09:41that can't be, that can't be the housing plan. They have to do something on the demand side.
09:47Builder stocks improved, uh, today because I think everyone in the market read the room. There's
09:52going to be something on the demand side. And it wasn't that long that they announced something to that
09:56nature. And then we have the new fed chairman coming, fed governors, maybe getting fired,
10:02whatever it is, part of the 2025 or 2026 forecast with the X variable, the government X variable that,
10:10you know, this is, this year is going to be different than the others, you know, and here
10:13we are, we've already had two announcements and, uh, the Venezuela situation. So it's nothing's
10:20normal. Wheeler, nothing is normal. And that's why we're, we're doing an, an, another podcast
10:27almost six at night, just because we're like, we, we can't let this go unanswered and, you know,
10:32unanswered over the weekend. We're like, we have to do something. It can't go answered, but,
10:36but let me give you all something here. Hold on one second. Oh, this will be a good for our
10:42people who are watching on YouTube. If you're not watching on YouTube, don't worry. I will describe
10:46this to you, but it is, uh, it's pretty great. So we're at, you want to talk about timing on things.
10:54I'm in Utah and Utah has a funny sense of humor. They got me, uh, peanut butter,
11:01Fannie Mae's original recipe, mortgage spreads. So I mean, come on. And then the news came,
11:09you know, so I got to tell you, man, I have not had peanut butter for a very long time. And
11:15Oh my God. Mortgage spreads tastes a lot better today.
11:22Okay. We'll end it there. Thanks for jumping on for a quick, uh, message here, Logan. And of
11:28course we have two tomorrow then that are coming out or two today when this comes out. Um, we'll
11:31talk to you. And it's jobs Friday and I'm flying to Boise in the morning to talk, man.
11:37It's crazy. No, chart daddy doctrine is a full effect, baby.
11:40Oh gosh. All right. Thank you again. Bye.
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