Lykken on Lending is hosting a series of blog talk radio shows about the future of mortgage banking. This week’s show was focused on the future of the secondary mortgage market. Will it be different? Will the mortgage-backed security structure survive? Will the 30 year fixed rate mortgage remain an option for borrowers? Dr. Michael Lea, of the Center for Real Estate at San Diego State University, joined the show today to give his opinions on the US secondary mortgage market and compared the US market to what works in overseas mortgage markets. According to Dr. Lea, among his other comments and opinions, the 30 year fixed rate mortgage is at risk (at least it will not be the predominant instrument), the industry needs a better balance of outlets (90% government guaranteed MBS is too much of one thing), the mortgage-backed security as a vehicle will survive but needs some tweaking (like skin in the game), and covered bonds have significant hurdles to overcome before they will be widely available in the US. He also thought borrowing rates will rise as the secondary market prices in the full cost of the risk, but he thinks the increased yields on private sector securities will exceed yields on US government guaranteed securities by only 30 basis points or so. This is all just food for thought. There are still many variables that need to be resolved before we can get a clear picture of what the secondary mortgage market will be like in the next few years.
Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline’s Joe Farr:
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