Growth in mortgage-backed securities holdings pushed the government-sponsored enterprises' combined retained portfolios up past a previous multiyear high in January, when
Together, Fannie Mae and Freddie Mac's total loan and MBS holdings rose to $278.45 billion during January from $271.69 billion the previous month and $180.65 billion a year earlier.
Fannie's retained portfolio grew to $141.64 billion during January compared to $132.46 billion a month earlier and $83.27 billion a year ago. The growth lifted the total for the GSEs combined even though Freddie's $136.81 billion portfolio was lower than December's $139.23 billion. It was above January's $97.38 billion.
Shrinkage in the loan component of Freddie's portfolio relative to the previous month accounted for its net monthly decline, outweighing a rise to $49.46 billion in its MBS holdings. Freddie had $45.5 billion in MBS in its retained portfolio during December and $24.87 billion a year earlier.
Both enterprises' MBS holdings were the highest seen in at least a year and primarily made up of government-related securities with a smaller nonagency component.
Fannie, which specified that most of the securities it held were its own, reported that it held $83.14 billion in MBS in January. That number compared to $71.62 billion in December and $33.62 billion a year earlier.
While Trump's order specifically calls for $200 billion in MBS buying, both retaining more loans and assets with Committee on Uniform Securities Identification Procedures numbers can help contribute to the President's aim of lowering rates by removing market supply.
"The loans otherwise would go to the market as CUSIPs," said Walt Schmidt, senior vice president at FHN Financial.
Schmidt was among analysts who had noted even before Trump's announcement that there was
The effectiveness of MBS buying for the retained portfolio shows in
This spread narrowed after the January announcement related to the MBS purchases and has generally remained at that level, Schmidt said.
"We've ground a little tighter in certain coupons, but it hasn't changed a whole lot since then," he said.
How fast MBS purchases and retained portfolio growth will be going forward is still unclear, but the current rate suggests the goal could be met over the next 12 months or so.
"They're on their way to doing it. Now are they going to keep the same pace? I don't know. They're certainly not going to do it in one month, but if they do it over a year's time, they're on pace," Schmidt said.
Moving at a deliberate speed makes it possible to lower rates without shocking the market or hurting the quality of the GSEs' portfolio, he said.
"Fannie and Freddie have a dual mandate, which is to purchase assets to try to lower mortgage rates, but they also want to add assets that are going to be valuable for their franchise in case they want to do an equity raise at some point in the future," Schmidt said.
