It’s a quiet morning in the markets with Treasuries little changed and S&P 500 futures a touch lower. Market participants are more focused on monetary policy this week, more specifically Thursday’s ECB meeting and next week’s Fed meeting. That said, an unexpected trade headline would quickly redirect market attention.

On another note, there’s been some chatter over the last week regarding the GSE Housing Reform Plan released by the Treasury Department last Thursday evening. GSE reform is something that’s been talked about for nearly 10 years since Fannie Mae and Freddie Mac went into conservatorship, but any attempt at passing legislation has fallen well short in Congress. This issue came back into focus this year when Mark Calabria was confirmed as head of the FHFA. He has been a big proponent of housing finance reform, particularly increasing the private market’s footprint. His team finally submitted their recommendations to Congress for legislative action, but as we’ve seen it characterized by some folks, it’s more of a “plan for a plan.” The expectations for Congressional action remain low, so it’s more about what can be done by administrative/executive order. Perhaps most import for investors of GSE-backed MBS, the report is careful to stress much caution with regards to altering the status of the guarantee and its impact on the stability of the MBS market. The plan calls for an explicit guarantee of eligible, conventional mortgages, similar to what “wraps” Ginnie Mae MBS. In other words, Calabria and Treasury Secretary Mnuchin are making it clear that they want to avoid market disruption.

Jason Haley
Managing Director, Investment Management Group