The Institutional Risk Analyst

Owners of crypto tokens hold nothing except an option to sell their flutter to a greater fool. The real worry for the future is that another financial debacle — à la FTX — where crypto was revealed to be pure fraud will surprise the markets as burned punters flee their speculations. The fact that crypto prices are increasingly being supported by stock issuance and schemes like perpetual futures contracts (Perps) suggests the end of the game is nigh.

In an earlier issue of The IRA, we noted that one reason that the GSE shares may be suffering is that the Trump Administration is apparently wrestling with how to take Fannie Mae and Freddie Mac out of conservatorship.

We expect to see continued consolidation in the world of residential mortgage finance in coming months. The sad fact is that many less competitive businesses in mortgage finance have been waiting for the FOMC to ride to the rescue with lower interest rates. If rate cuts do not materialize in 2025, however, then many of these businesses may not survive.

“The boards of the GSEs don’t have a fiduciary duty to the Enterprises,” Pulte noted. “They have a fiduciary duty to the conservatorship.”

Some of the smaller holders of MSRs may ask themselves if selling right now is not the best strategy over a 36-48 month horizon. 

A more efficient mortgage backed securities market benefits everyone by lowering mortgage rates and making home ownership more affordable.

There is an old rule on Wall Street that industry sectors like airlines and auto manufacturers are trades rather than investments...