Mortgage industry veteran Paul Van Valkenburg explains what this means for mortgage-backed securities – the second largest U.S. fixed income market after treasuries – which have seen issuances drop to historic lows.“Issuance of mortgages is low because of higher rates.
Following is Van Valkenburg’s discussion with Leininger. It has been edited for length. Listen to the full conversation above. The U.S. mortgage market is the gold standard for the world. More than two-thirds of GDP is consumer purchasing – their most significant asset is their real estate, and their most significant liability is their mortgage.
Issuance of mortgages is low because of higher rates. But what I anticipate is that originators will utilize this excess capacity to move into originating lower credit mortgages - non-qualified - which will predominantly be put on their balance sheet. An exchange traded futures contract has had long standing appeal but to figure out the nuts and bolts of making it a success has been a major challenge, so congrats to you guys for getting it done. That it permits deliverability is a big plus. It can service mortgage banking constituents who can utilize it as if it was an over-the-counter futures contract.
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