{"id":44496,"date":"2023-08-04T12:37:24","date_gmt":"2023-08-04T16:37:24","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/good-news-about-your-mortgage-as-fitch-downgrades-the-u-s-freddie-mac-and-fannie-mae\/"},"modified":"2023-08-04T12:37:26","modified_gmt":"2023-08-04T16:37:26","slug":"good-news-about-your-mortgage-as-fitch-downgrades-the-u-s-freddie-mac-and-fannie-mae","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=44496","title":{"rendered":"Good news about your mortgage as Fitch downgrades the U.S., Freddie Mac and Fannie Mae"},"content":{"rendered":"
\n

Most U.S. home loans end up in the nearly $9 trillion market for residential mortgage bonds with government backing, a critical corner of housing finance that boomed in the wake of the subprime-mortgage crisis.<\/p>\n

The \u201cagency\u201d mortgage-bond market resembles the roughly $25 trillion Treasury securities market in that it provides some of the lowest borrowing costs available, and in that defaults are considered unlikely because the bonds come with U.S. government backing. <\/p>\n

\n

Fitch Ratings on Tuesday followed through with a May threat to cut the U.S. debt rating, pointing to \u201cfiscal deterioration\u201d expected over the next three years as well as the government\u2019s large and growing debt burden and the \u201cerosion\u201d of governance, including through \u201crepeated debt limit standoffs and last-minute resolutions.\u201d<\/p>\n

A day later it lowered the top AAA debt ratings of housing giants Freddie Mac
\n FMCC,
\n -0.10%<\/bg-quote>
\n and Fannie Mae
\n FNMA,
\n +2.16%<\/bg-quote>
\n by a notch to AA+, saying the \u201cfirms continue to benefit from meaningful financial support from the U.S. government,\u201d but also that the move wasn\u2019t driven by a deterioration in credit, capital or liquidity at the agencies.<\/p>\n

Stocks were headed lower again Thursday, a day after the S&P 500
\n SPX
\n booked its sharpest daily percentage decline since April, while the 10-year Treasury yield
\n BX:TMUBMUSD10Y
\n rose to nearly 4.2%, as investors focused on the Treasury\u2019s big $1 trillion borrowing plan for the third quarter.<\/p>\n

Here\u2019s what to know about the biggest part of the U.S. housing finance market now that Fitch has become the first major credit-rating firm to lower the U.S.\u2019s AAA credit rating to AA+ since S&P Global cut its rating in 2011.<\/p>\n

Refi wave is a big buffer<\/h2>\n

The good news is that most U.S. homeowners already refinanced during the pandemic as the 30-year fixed mortgage rate fell to a 2.68% low in December 2020 from 4.87% in November 2018, according to data from the Urban Institute.<\/p>\n

That provides a cushion for homeowners sitting tight with ultralow mortgage rates, sparing them the brunt of the Fed\u2019s rate-hiking campaign.<\/p>\n

It also should limit any reverberations from Fitch\u2019s decision to no longer apply its top ratings to U.S. debt. The chart below drives the point home, showing that almost no mortgages are ripe for refinancing with rates hovering around 7%.<\/p>\n

<\/p>\n
<\/p>\n
<\/div>\n<\/figure><\/div>\n

Mortgage-backed securities a \u2018haven play\u2019<\/h2>\n

Agency mortgage bonds continue to be viewed in financial markets as a safe-haven play. Like the rally in the Treasury market in 2011 following S&P Global\u2019s surprise downgrade of U.S. credit, Fitch\u2019s rating move could be a shot in the arm for agency mortgages. <\/p>\n

\u201cI would not expect this downgrade by itself to have a meaningful impact on the spreads attaching to agency [mortgage-backed securities],\u201d said Yesha Yadav, a professor of law at Vanderbilt University, adding that the sector staged a powerful rally following the S&P Global downgrade roughly a decade ago. <\/p>\n

Spreads are the premium investors are paid on bonds above the risk-free Treasury rate, while also serving as a gauge of risk sentiment.<\/p>\n

\u201cOf course, there may be broader concerns surrounding the housing market and possible defaults arising out of higher rates,\u201d Yadav said. <\/p>\n

She also flagged a \u201clarger and deeper worry\u201d signaled by Fitch in its downgrade: How much can investors continue to trust the default-free reputation of U.S. Treasury securities with Congress continuing to use U.S. credit ratings as a \u201cbargaining chip in negotiations\u201d?<\/p>\n

U.S. debt load in focus<\/h2>\n

Agency mortgage bonds are pools of home loans that are underwritten to stricter credit standards than prevailed in the run-up to the 2007-2008 global financial crisis. U.S. housing giants Freddie Mac and Fannie Mae don\u2019t make home loans, but they do buy ones that fit their tighter lending criteria and issue pools of bonds with the implicit backing of the U.S. government.<\/p>\n

Freddie declined to comment. Fannie said the move by Fitch was \u201cconsistent with its recent ratings downgrade of the U.S.,\u201d reiterating that it wasn\u2019t driven by fundamental credit, capital, or liquidity deterioration at Fannie Mae.<\/p>\n

Fitch didn\u2019t respond to requests for comment.<\/p>\n

Read:<\/strong> What Fitch\u2019s U.S. credit downgrade means for investors<\/p>\n

While financial markets are largely expected to shake off the U.S. losing its top AAA debt rating for a second time in roughly a decade, it could usher in a period of greater \u201cfiscal austerity,\u201d with the lowered ratings likely to become \u201ca political lighting rod,\u201d according to Oxford Economics.<\/p>\n

Also, while the Federal Reserve may have only a few more rate hikes in its arsenal before it calls it quits on its inflation fight, the mortgage industry is tethered to fluctuations in longer-dated Treasury yields.<\/p>\n

Scott Buchta,\u00a0head of fixed-income strategy at Brean Capital, told MarketWatch the Fitch downgrade of the U.S. looks less concerning than the potential for volatility in the mortgage market from higher Treasury yields on the back of heavy new supply.<\/p>\n

The Treasury earlier this week said it expects to borrow about $1 trillion in the third quarter, an amount that Vivien Lou Chen writes is the largest ever for that time frame and a potential source of pain for investors. <\/p>\n

\u201cA bigger concern for the mortgage market is the amount of debt that\u2019s expected to be issued,\u201d Buchta said.<\/p>\n

Read: <\/strong>New Jersey house prices rise at fastest rate in the nation \u2014 but other states saw prices fall by up to 8%<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Most U.S. home loans end up in the nearly $9 trillion market for residential mortgage bonds with government backing, a critical corner of housing finance that boomed in the wake of the subprime-mortgage crisis. The \u201cagency\u201d mortgage-bond market resembles the roughly $25 trillion Treasury securities market in that it provides some of the lowest borrowing […]<\/p>\n","protected":false},"author":1,"featured_media":44497,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-44496","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nGood news about your mortgage as Fitch downgrades the U.S., Freddie Mac and Fannie Mae | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Most U.S. home loans end up in the nearly $9 trillion market for residential mortgage bonds with government backing, a critical corner of housing finance\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=44496\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Good news about your mortgage as Fitch downgrades the U.S., Freddie Mac and Fannie Mae | iFintechWorld\" \/>\n<meta property=\"og:description\" content=\"Most U.S. home loans end up in the nearly $9 trillion market for residential mortgage bonds with government backing, a critical corner of housing finance\" \/>\n<meta property=\"og:url\" content=\"https:\/\/ifintechworld.com\/?p=44496\" \/>\n<meta property=\"og:site_name\" content=\"iFintechWorld\" \/>\n<meta property=\"article:published_time\" content=\"2023-08-04T16:37:24+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-08-04T16:37:26+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/08\/1691167045_social.jpeg\" \/>\n\t<meta property=\"og:image:width\" content=\"1280\" \/>\n\t<meta property=\"og:image:height\" content=\"640\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"News Room\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"News Room\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/ifintechworld.com\/?p=44496#article\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=44496\"},\"author\":{\"name\":\"News Room\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\"},\"headline\":\"Good news about your mortgage as Fitch downgrades the U.S., Freddie Mac and Fannie Mae\",\"datePublished\":\"2023-08-04T16:37:24+00:00\",\"dateModified\":\"2023-08-04T16:37:26+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=44496\"},\"wordCount\":930,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"keywords\":[\"Featured\"],\"articleSection\":[\"Investing\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/ifintechworld.com\/?p=44496#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/ifintechworld.com\/?p=44496\",\"url\":\"https:\/\/ifintechworld.com\/?p=44496\",\"name\":\"Good news about your mortgage as Fitch downgrades the U.S., Freddie Mac and Fannie Mae | iFintechWorld\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/#website\"},\"datePublished\":\"2023-08-04T16:37:24+00:00\",\"dateModified\":\"2023-08-04T16:37:26+00:00\",\"description\":\"Most U.S. home loans end up in the nearly $9 trillion market for residential mortgage bonds with government backing, a critical corner of housing finance\",\"breadcrumb\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=44496#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/ifintechworld.com\/?p=44496\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/ifintechworld.com\/?p=44496#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/ifintechworld.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Good news about your mortgage as Fitch downgrades the U.S., Freddie Mac and Fannie Mae\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/ifintechworld.com\/#website\",\"url\":\"https:\/\/ifintechworld.com\/\",\"name\":\"Repay Down\",\"description\":\"Latest Personal Finance News, Tips and Updates\",\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/ifintechworld.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/ifintechworld.com\/#organization\",\"name\":\"Repay Down\",\"url\":\"https:\/\/ifintechworld.com\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"width\":558,\"height\":90,\"caption\":\"Repay Down\"},\"image\":{\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\",\"name\":\"News Room\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"caption\":\"News Room\"},\"sameAs\":[\"https:\/\/ifintechworld.com\"],\"url\":\"https:\/\/ifintechworld.com\/?author=1\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Good news about your mortgage as Fitch downgrades the U.S., Freddie Mac and Fannie Mae | iFintechWorld","description":"Most U.S. home loans end up in the nearly $9 trillion market for residential mortgage bonds with government backing, a critical corner of housing finance","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/ifintechworld.com\/?p=44496","og_locale":"en_US","og_type":"article","og_title":"Good news about your mortgage as Fitch downgrades the U.S., Freddie Mac and Fannie Mae | iFintechWorld","og_description":"Most U.S. home loans end up in the nearly $9 trillion market for residential mortgage bonds with government backing, a critical corner of housing finance","og_url":"https:\/\/ifintechworld.com\/?p=44496","og_site_name":"iFintechWorld","article_published_time":"2023-08-04T16:37:24+00:00","article_modified_time":"2023-08-04T16:37:26+00:00","og_image":[{"width":1280,"height":640,"url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/08\/1691167045_social.jpeg","type":"image\/jpeg"}],"author":"News Room","twitter_card":"summary_large_image","twitter_misc":{"Written by":"News Room","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/ifintechworld.com\/?p=44496#article","isPartOf":{"@id":"https:\/\/ifintechworld.com\/?p=44496"},"author":{"name":"News Room","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61"},"headline":"Good news about your mortgage as Fitch downgrades the U.S., Freddie Mac and Fannie Mae","datePublished":"2023-08-04T16:37:24+00:00","dateModified":"2023-08-04T16:37:26+00:00","mainEntityOfPage":{"@id":"https:\/\/ifintechworld.com\/?p=44496"},"wordCount":930,"commentCount":0,"publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"keywords":["Featured"],"articleSection":["Investing"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/ifintechworld.com\/?p=44496#respond"]}]},{"@type":"WebPage","@id":"https:\/\/ifintechworld.com\/?p=44496","url":"https:\/\/ifintechworld.com\/?p=44496","name":"Good news about your mortgage as Fitch downgrades the U.S., Freddie Mac and Fannie Mae | iFintechWorld","isPartOf":{"@id":"https:\/\/ifintechworld.com\/#website"},"datePublished":"2023-08-04T16:37:24+00:00","dateModified":"2023-08-04T16:37:26+00:00","description":"Most U.S. home loans end up in the nearly $9 trillion market for residential mortgage bonds with government backing, a critical corner of housing finance","breadcrumb":{"@id":"https:\/\/ifintechworld.com\/?p=44496#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/ifintechworld.com\/?p=44496"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/ifintechworld.com\/?p=44496#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/ifintechworld.com\/"},{"@type":"ListItem","position":2,"name":"Good news about your mortgage as Fitch downgrades the U.S., Freddie Mac and Fannie Mae"}]},{"@type":"WebSite","@id":"https:\/\/ifintechworld.com\/#website","url":"https:\/\/ifintechworld.com\/","name":"Repay Down","description":"Latest Personal Finance News, Tips and Updates","publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/ifintechworld.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/ifintechworld.com\/#organization","name":"Repay Down","url":"https:\/\/ifintechworld.com\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","width":558,"height":90,"caption":"Repay Down"},"image":{"@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61","name":"News Room","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","caption":"News Room"},"sameAs":["https:\/\/ifintechworld.com"],"url":"https:\/\/ifintechworld.com\/?author=1"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/44496","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=44496"}],"version-history":[{"count":1,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/44496\/revisions"}],"predecessor-version":[{"id":44498,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/44496\/revisions\/44498"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/media\/44497"}],"wp:attachment":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=44496"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=44496"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=44496"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}