![]() ![]() This has brought mortgage issuances to a screeching halt. Mortgage rates have risen and fallen throughout history, but very rarely have mortgage-rate changes moved with the velocity seen over the last few months. One is the speed of the Federal Reserve’s interest-rate hikes. And in this volatile market environment, where Wall Street analysts are watching for something to go wrong that could trigger a cascade of financial woes, the mortgage market is a potential falling domino. Today, this intricate financial system handling mortgages is seizing up. ![]() (Source: Federal Home Loan Mortgage Corporation ) As the homeowner makes monthly principal and interest payments, a mortgage servicer ensures that the right parties (e.g., investors) receive their appropriate payments timely. Investors, including investment funds, pension funds, insurance companies, and foreign institutions, buy these MBS bonds. Depending on how the mortgage was underwritten, many MBSs are backed by federal government agencies such as Fannie Mae, Ginnie Mae, and Freddie Mac. The lender sells the mortgage within 30 days of closing-which frees up the cash to make the next loan-to an entity that pools bundles of hundreds of mortgages and issues a mortgage-backed security (MBS). A bank or mortgage lender (such as Rocket Mortgage) originates the mortgage and earns a fee from the borrower. ![]() Let’s quickly walk through what happens when someone takes out a mortgage. More than 50 million Americans have a mortgage, and a significant portion of Americans’ net worth is tied to their primary homes. consumers, the mortgage interest rate is probably the most direct translation of the Federal Reserve’s interest-rate moves. And there’s no better illustration of this than the multiple layers of issues plaguing the U.S. The financial markets are fragile right now. ![]()
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