Mortgage rates rise as debt ceiling standoff drags on The Mortgage Bankers Association is scheduled to release mortgage applications figures on April 5. Homes in Centreville, Maryland, US, on Tuesday, April 4, 2023. Placing the GSEs on watch for a downgrade, a status Fitch calls “rating watch negative,” is a direct result of uncertainty about the United States fulfilling its debt obligations and concern about the level of support the housing GSEs can expect if the US rating were to drop.īut, Fitch added, if it were to downgrade the US sovereign due to debt ceiling challenges, it would not necessarily lead to an immediate downgrade of the housing GSEs’ ratings - so long as the housing GSEs continued to perform on their respective obligations.įitch notes that the GSEs primarily cover their obligations with cash flows from operations, as opposed to direct reliance on the federal government. Because they are backed by the government, these securities are viewed as less risky than other investments and considered to be as creditworthy as the US government.īut this flow of funds could be disrupted if the United States defaults on its debt, Fitch warned.

The enterprises buy loans from lenders, pools them and sells them as securities to investors. This ultimately allows more homeowners to borrow at more affordable rates. The aim of Freddie and Fannie is to provide liquidity into the mortgage market and enable a reliable flow of affordable funds to mortgage lenders. They are each a government-sponsored enterprise, or GSE, chartered by Congress. Scott Applewhite/APįannie and Freddie, which guarantee roughly 70% of the country’s mortgages, do not directly issue mortgages to borrowers, but instead buy mortgages from lenders and repackage them for investors. Negotiations on the debt limit continue in the House of Representatives between mediators from the Biden administration and Speaker of the House Kevin McCarthy, R-Calif., at the Capitol in Washington, Wednesday, May 24, 2023.

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