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American Capital Agency Corp. Message Board

  • zamanaha zamanaha Aug 29, 2011 6:22 PM Flag

    refi mechanics

    can someone level-headed explain the mechanics of a likely refi proposal so we can predict the effect on AGNC. After the central bankers' confab, I have the distinct impression some variation of mass refi will, in fact, emerge.

    So - the agencies will identify a bulk set of mortgages as candidates -- underwater, higher rate, some bang-for-the-buck criteria that may or may not overlap with mortgages typical in MBS pools in which AGNC is invested.

    These mortgages will be bulk-refinanced; the securities which they back will see a cash influx at par and a drop in future income. The new mortgages replacing them get bundled into new securities and sold.

    So the question for AGNC is how many mortgages, what kind of timeframe, and are the refis clustered in securities in which AGNC is invested?

    Is that the deal? Any early analysis around on likely impact? e.g. 30% of all mortgages?, over-(or under-) exposed across AGNCs base?, 2 years time?

    I don't see anything stopping this with political backing in place. That's politics and economics. But how/when does it affect the stock? That's trading.

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    • It's political nonsense. Won't go anywhere. Even if it did, the agencies can't change the terms on the already-issued bonds. So this would only be possible through pre-payment. But that's not doable. To raise money for it, they would have to issue long-term bonds with rates nearly equal to medium-term bonds (good luck with that).

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