This will be a short diary. I can't comment very much, but I felt the community might like to know that the GSEs -- Fannie Mae and Freddie Mac -- are now in a "no bid" situation for hybrid ARM mortgage product.
What does that mean?
It means that they have ceased acting as a guarantor between originators and investors on hybrid ARMs -- loans which have a period of fixed interest followed by an adjustment to floating rate -- and the entire market for such mortgage instruments has simply stopped.
This is reflective of a concern, sparked allegedly by someone in the Dept. of the Treasury who may have spoken out of school, who insinuated something "not so good" about the continued viability of the implied guarantees of the Federal government which in turn underpin the viability, liquidity and stability of the GSEs.
Another way to put this is, Fannie, Freddie are in a heap of shit this morning, along with many already-beleaguered mortgage giants who depend on them for liquidity.
I'm not characterizing this as good or bad at the macro-level, nor will I be surprised, shocked or offended by anybody who decides to show a little schadenfreude here. Have at it. I'm just the messenger.
I'll clarify what I can, and be honest when I don't know.
UPDATE: Great question below, so I'll answer it here -- this is NOT bad news for anybody who holds any existing hybrid ARM mortgage, unless perhaps they were counting on refinancing into another one before their current one adjusted.