Bloomberg News

Fannie Mortgage Bonds Gain on Change to Refinancing Guidelines

November 17, 2011

Nov. 16 (Bloomberg) -- Fannie Mae and Freddie Mac mortgage bonds gained after the government-supported companies detailed changes to their refinancing rules.

Fannie Mae’s 6.5 percent, 30-year fixed-rate mortgage securities rose about 0.20 cent on the dollar to 110.55 cents, the highest since Oct. 14, as of 12:05 p.m. in New York, according to data compiled by Bloomberg. The bonds outperformed similar-duration U.S. government notes by about 0.25 cent.

Fannie Mae and Freddie Mac offered additional information yesterday on adjustments to refinancing rules for loans to borrowers with little or no home equity under the Home Affordable Refinance Program. The government-controlled companies’ letters to lenders suggested less relief for so- called representations and warranties that can be used to forced mortgage repurchases than some investors anticipated.

“The rep and warranty relief newly offered by Fannie Mae through yesterday’s announcement is not all that significant and, at the very least, somewhat lower than what has been already been priced in,” Nomura Securities International Inc. analysts led by Ohmsatya Ravi in New York wrote in a note to clients.

The companies also revealed the maximum upfront fees they plan to charge on most riskier loans will fall to 0.75 percent, from 2 percent, unless homeowners refinance into debt with terms of 20 years or less. On Oct. 24, their regulator said they would eliminate the fees for short-term debt and reduce them for other loans without providing details.

--Editors: John Parry, Mitchell Martin

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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