TARP Redirect Plunges MBS

By:: Bill Rice - MortgageLoan.com

US Treasury Secretary Paulson's sharp redirection on the objective of the TARP funds had a dramatic effect on overnight markets and the MBS market. Abandoning the original plan to buy troubled mortgage assets and refocusing on other "non-bank" asset classes like credit cards and auto. This immediately dropped the bottom out of non-agency MBS, consisting mostly of subprime, non-agency, mortgage securitizations. This is likely to send mortgage rates down sharply today as spreads widen--treasuries heading higher and MBS heading lower.

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