> The Gov has guaranteed all of these! The word "guarantee" gets tossed around a lot, but it's misleading: Fannie and Freddie's "implicit guarantee" only mean

> The Gov has guaranteed all of these! The word "guarantee" gets tossed around a lot, but it's misleading: Fannie and Freddie's "implicit guarantee" only means that the government will lend these GSEs funds to ensure timely payments of principal and interest to mortgagees (not MBS investors!), at rates slightly above the government's own borrowing rate, up to the "conforming loan limit" which is $417,000 in most areas. So it doesn't entirely eliminate default risk. And it doesn't reduce servicer risk or interest rate risk at all. Only in 2013 with QE3 did The Fed start buying Ginnie Mae MBSs with an "explicit guarantee" that entirely eliminates default risk. (These securities still have issuer/servicer risk.) But The Fed is still buying non-Ginnie MBSs as well.