This article provides information regarding the supply side threats to the Agency MBS market. Mortgage-Backed Securities (MBS) are securities issued by government-sponsored enterprises (GSEs) that are backed by loans insured by the US government. These types of securities are largely seen as a safe, reliable investment vehicle, and have become more popular over the past few years as investor interest has grown.
However, despite this surge in demand, the Agency MBS market is facing an increasing threat from the supply side. The problem is that the GSEs are not producing as many MBS as they used to, as a result of tighter underwriting criteria and new regulatory restrictions. The combination of these factors have resulted in fewer loans being eligible for mortgage-backed securities, reducing the total supply. This, in turn, puts upward pressure on prices, which makes Agency MBS less appealing to investors who are looking for higher returns than what can currently be found in this market.
Furthermore, the Agency MBS market is also being hindered by a lack of securitization and liquidation options. This is due to the fact that mortgage lenders have become more conservative in their lending practices, with fewer mortgage-backed securities being offered as an option. This has further limited the ability of the Agency MBS market to attract new investments.
As a result, the Agency MBS market has been facing a consistent downward pressure of late. While these supply side factors won’t be changing anytime soon, there are some steps that can be taken to help stabilize it. These include offering investors more security in the form of higher yields, as well as working to create additional securitization and liquidation opportunities. Ultimately, the Agency MBS market needs to find a way to increase its supply if it is to survive in the long run.
You can read this full article at: https://www.housingwire.com/articles/agency-mbs-market-is-facing-a-supply-side-threat/(subscription required)
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