Trade groups push plan to let GSEs buy MBS to ease mortgage rates

"The idea relies on amending the Preferred Stock Purchase Agreements (PSPA) to enable the GSEs to purchase up to $300 billion of their own MBS and Ginnie Mae MBS when the spread between the 30-year mortgage rate and the 10-year Treasury exceeds 170 basis points The proposal was outlined in a letter sent by the Community Home Lenders of America (CHLA) and the Independent Community Bankers of America (ICBA) to the Treasury Secretary Scott Bessent and the Federal Housing Finance Agency (FHFA) Director Bill Pulte."

"Regulators must address the secular and structural decline in demand for mortgage-backed securities, the trade groups stated. According to them, the GSEs are jointly $246 billion below their current MBS caps, which means they could begin immediately working to reduce spreads. That could lower mortgage rates, currently around 6.35%, by roughly 30 basis points. As of Oct. 17, the spread was 222 basis points, above the 140-170 that has persisted since 2022, when the Federal Reserve suspended MBS purchases."

Community Home Lenders of America (CHLA) and the Independent Community Bankers of America (ICBA) urged the Treasury Secretary Scott Bessent and FHFA Director Bill Pulte to amend the Preferred Stock Purchase Agreements (PSPA) to allow Fannie Mae and Freddie Mac to purchase up to $300 billion of their own MBS and Ginnie Mae MBS when the 30-year mortgage minus 10-year Treasury spread exceeds 170 basis points. The groups flagged a secular, structural decline in demand for MBS and said the GSEs are jointly $246 billion below current caps, enabling immediate action to reduce spreads. That action could lower mortgage rates by roughly 30 basis points from about 6.35%. The spread was 222 basis points as of Oct. 17, and investor appetite for MBS among domestic and foreign banks, foreign central banks and insurers remains limited. The proposal followed the Fed signaling an end to quantitative tightening and would use a temporary, targeted GSE intervention to stabilize mortgage markets.

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