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They can't sell their MBS to the Fed? Who exactly is the Fed buying from then?
by alexpetralia 7y ago
They can't sell their MBS to the Fed? Who exactly is the Fed buying from then?
- ivalm 7y agoOwner and servicer are different companies. Servicer does not own the loan, they simply paid an upfront cost to have the right to collect payments from homeowners (from which they take a cut). So the owner can sell their MBS to Fed to reduce uncertainty on their balance sheet, but servicer is just stuck servicing the loan — they already paid the upfront cost for the right to service the loan. That’s why they hedge by shorting MBS.