Fannie Mae-No Politics (FNMA)

[big-yank]

I think where you are struggling is the notion that the GSEs cannot reinvest the proceeds. They can, and do. They are buying up mortgages all the time as part of their chartered mandate to bring liquidity to the mortgage market. The one problem you correctly note is that the higher rate paper being sold is being replaced with lower rate MBS being issued as interest rates remain so compressed from Fed action/inaction. I actually think Fannie, in particular, has done a meritorious job of managing the spreads in the numbers reported in their last two 10-Q's. Freddie, not so much.

Just trying to be helpful, here.

JMHO.