First Tweet of the new year
Here is the set up for 2024 GSE Recap and release- a series of steps that will take 18 months or longer.
1. National Shortage of Single Family homes. Most estimates 5,000,000 or more.
2. Affordability at all time low.
3. 30 year mortgage spreads historically high. With the 10 year treasury at 4% mortgage rates should be 5.75%
4. Obama used the sweep for purposes other than housing. That lack of investment in the housing eco system, coupled with 15 years of c-ship is a major contributor to the housing crisis today. The bad faith finding in Berkeley Et Al further narrows what the gov can do in self dealing going forward.
5. Post Dodd Frank fallout from balance sheet duration risk evidenced by SVB leaves banks with no appetite for long duration assets like MBS. This further complicates liquidity issues in the MBS space.
6. Election year politics - most think this is a “Trump” trade. I disagree. Biden is a seasoned politician surrounded by skilled strategists. Polling suggests housing affordability is a key campaign issue.
7. Biden will start the recap and release process, claim credit for solving the housing crisis, and appropriate the 100 billion warrant money to congressional districts in a variety of programs to address affordability but more importantly SUPPLY. This is the easiest big idea win available in the current election cycle.
8. The Franklin Tn project increases affordable supply through infrastructure grants. 100% directed to increasing workforce housing affordability and supply.
9. 100 Billion recap and release = 230+ million for each of the 435 Congressional districts.
10. Republican and Democrats agree the Cship should end. This is a paradigm shift from the Corker years that contributes to the affordability / supply index of today.
Warrants will be exercised. Common lack dilution protection against SPSPA being converted.. Common thus have no security. Preferred will be made whole.
