Tuesday, March 31, 2020
The Federal Reserve unloaded its bazooka of stimulus all over the markets in the last two weeks. But there's some major collateral damage. By flooding the markets with money, they may have accidentally trigged a housing market crash. The Mortgage Bankers Association (MBA) warned of large scale disruption' to the housing market and accused the Fed of using a sledgehammer.' By flooding the market with money, the Fed forced down rates. Problem is, that just blew up the hedge. Mortgage bankers are now getting margin calls and need to pay tens of millions of dollars to meet them. Even well capitalised lenders are on the brink of going under because of it. In a letter to regulators, the MBA wrote: Margin calls on mortgage lenders reached staggering and unprecedented levels by the end of the week.
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