Friday, December 1, 2017
MANAGING DIRECTOR: Scott Carrithers   PORTFOLIO SALES AND SERVICE: Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty Robert Brickson • Kevin Doyle • Lonnie Harris •  Mark Tranckino • Robert Schuyler  Tom Toburen • Josh Kiefer • Nicole Burczyk • Kelley Frye • Natalie Regan • Aaron Stoffer • Chuck Honeywell

US Treasury Market
Date	1 mo	3 mo	6 mo	1 yr	2 yr	3 yr	5 yr	7 yr	10 yr	20 yr	30 yr
11/24/17	1.14	1.29	1.45	1.61	1.75	1.85	2.07	2.23	2.34	2.58	2.76
11/27/17	1.15	1.27	1.41	1.62	1.74	1.84	2.06	2.21	2.32	2.57	2.76
11/28/17	1.16	1.30	1.46	1.61	1.75	1.85	2.07	2.24	2.34	2.58	2.77
11/29/17	1.17	1.29	1.45	1.61	1.78	1.86	2.09	2.27	2.37	2.62	2.81
11/30/17	1.14	1.27	1.44	1.62	1.78	1.90	2.14	2.31	2.42	2.65	2.83

                                                                                                                                         Source: U.S. Department of the Treasury, as of 11/30/17  

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New Conforming Loan Limits for Fannie Mae and FHLMC

On Tuesday of this week, the Federal Housing Finance Authority (FHFA) announced an increase in the maximum loan amounts that Fannie and Freddie will accept to qualify for the agencies guarantee.  The level was adjusted due to the continued increase in housing prices.  The maximum loan limit is now $453,100, up from $424,100 in 2017.  The previous limit was $417,000 from 2006 – 2016.  The only exception to these levels are referred to as High Cost Areas such as east and west coast markets where housing is much more expensive.  In these markets, a maximum cap of 150% of the baseline level is allowed.  So, with the baseline now at $453,100 the cap would be $679,650. 

What does this mean to you as a buyer of Mortgage Backed Securities?  Well, with higher allowable mortgage levels comes the potential for greater prepayments.  The greater the mortgage balance the greater the economic incentive for a homeowner to refinance loans in fixed rate pools, or lock in rates if they have an Adjustable Rate Mortgage.  So, the greater the premium you pay for your MBS be sure to look under the hood to see the average loan sizes of your pool.  If they are on the very high side of the maximum loan limits or if the geographics are heavily weighted to High Cost Areas, your premium may be at greater risk of faster prepays.

This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.

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