Okay, I am going to try to explain a very unusual and complicated anomaly in our current mortgage market. These are based on comments that Fannie Mae released on Friday. I will take some of the comments out of context and add my take on the comments for your review. Generally, when the market experiences a flight to quality, money is moving into US Treasuries and out of the stock market. However, with Treasury yields so low, market participants are buying the next best thing, which is GNMA, mortgage-backed securities or in plain talk FHA and VA loans. The FHA and VA mortgage-backed securities have the explicit grarantee of the US Government. Purchasing GNMAs allows an investor to enjoy the government guarantee while yielding considerably more than US Treasuries. In times like these, banks prefer to own GNMA mortgage-backed securities rather than conventional MBS for a reason other than the explicit government guarantee. The reason is capital. Banks have to hold a certain amount of capital against their investments. However, they are required to hold signifincantly less capital against their GNMA holdings as compared with their conventional MBS holdings. As a result, the rates on FHA and VA loan products are about .625% lower in rate than conventional financing. Government loans currently the best buy on the market. Consult with your lender today for actual rates that fit your situation. Elizabeth Fontanini, CMPS® Wallick & Volk 320 North Leroux Street, Suite A
Flagstaff, AZ 86001
928-600-9360 direct | 
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