Mortgage industry liquidity risk returns
Mortgage industry liquidity risk returns
Abstract
In June 2020, the Fed was buying billions of dollars per day in Treasury debt and mortgage-backed securities, driving rates below 3%. Two years ago, loans were profitable when they closed and were earning gain on sales margins of three and even four percentage points. The prospect of modifying EBOs into 40-year terms promises big losses to government servicers. The EBO trade could cost the mortgage sector. The mortgage industry could cost millions in losses in the first quarter.
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