Corporate tax cuts would result in negative net worth for Federal Home Loan Mortgage Corp (OTCMKTS:FMCC) and its sister concern as it would decline the value of owned DTAs. This view was expressed by Dick Bove of Rafferty Capital. As a result, new Treasury Secretary Steven Mnuchin have to finalize a contract with investors preceding to any tax bill. Bove stated that Mnuchin understand the GSEs and this can be accredited to his experience related to IndyMac. He added that if there is anyone in the United States who can perform it, it’s the person who solved IndyMac.
Bove considers that it’s possible Mnuchin has by now held discussions with Trump supporter and Fannie shareholder John Paulson, and that other leading investors like Bill Ackman and Bruce Berkowitz would prefer a quick deal versus spending millions and years in court. On January 20, all the material Democrats have withdrawn from the courts becomes accessible to the Trump administration. This provides Mnuchin staggering leverage against prospective Democratic opposition.
In unrelated news, Federal Home announced the report of its Primary Mortgage Market Survey® reflecting average fixed mortgage rates surging for the fifth successive week. 30-year FRM averaged 4.08% with a 0.5-point average for the week closing December 1, 2016 compared to 4.03% in the previous week. In the same period a year ago, the 30-year FRM was 3.93%.
15-year FRM in this week came at 3.34% with an average 0.5-point compared to 3.25% in the last week. In the same period a year ago, the 15-year FRM was 3.16%.
5-year Treasury-indexed hybrid ARM came at average 3.15% this week with 0.4-point average compared to average of 3.12% in the last week. A year earlier, the 5-year ARM was 2.99%. Mean commitment rates should be posted along with average points and fees to show the total upfront cost of getting the mortgage.