ML-Implode News - Rating Agencies' Thoughts on Servicing Changes; More on Treasury and GSE's

``First, Freddie has already been reducing its retained portfolio at an annualized rate of 22% since the beginning of the year and its current portfolio size is only $23 billion more than the $558 billion cap as of December 2013. The decline in Freddie's non-agency MBS and mortgage loan portfolios should be more than sufficient to meet its portfolio cap requirements. However, Fannie is likely to be forced reduce its agency MBS holdings at a faster pace than before. For a base case, some estimate that Fannie needs to reduce its agency MBS holdings by $70-$80 billion in 2013 while Freddie will have the option of keeping its agency MBS holdings unchanged.
Second, a few investors are concerned that Fannie or Freddie may be forced to sell non-agency MBS. On the other hand, there might not be any meaningful selling of non-agency by the GSEs considering that Freddie has a significantly larger holding of non-agency mortgage backed securities among the two GSEs but its retained portfolio size is such that it doesn't have to sell anything actively since current pay-downs are enough to meet its retained portfolio cap in December 2013. And third, any selling of agency MBS by Fannie is likely to be focused in higher coupon MBS (this is what they own) rather than in production coupons but this selling is unlikely to occur before year-end 2012.''

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Rating Agencies' Thoughts on Servicing Changes; More on Treasury and GSE's