AI Summary
5 min read🎙️ The Voices & The Context
- The Format: Casual expert chat between two co-hosts, structured like a professional podcast episode with back-and-forth analysis on financial markets.
- The Key Players:
- Jay Backow: Co-head of securitized products research at Morgan Stanley; leads on program details, market context, and forecasts.
- Jim Egan: The other co-head; focuses on housing implications, affordability, and broader market effects. Solid chemistry—polished, complementary banter with light humor (e.g., Jim's chess team nod).
- The Vibe: Educational and analytical, with a professional optimism about market upsides; low-drama intensity but engaging for finance fans tracking policy impacts.
🗝️ Key Themes & Topics
The episode dives into recent Trump administration housing initiatives, unpacking a major GSE announcement amid a $10 trillion mortgage market. Core focus: policy effects on rates, affordability, and sales forecasts for 2026.
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What you'll learn
- 1 (00:00) **🎙️ Introduction: Jim Egan**
- 2 (00:41) **$200 Billion GSE Mortgage Purchase Program**
- 3 (02:02) **Immediate Market Reaction**
- 4 (02:33) **Program Uncertainties and Next Steps**
- 5 (03:36) **Housing Market Implications**
- 6 (05:09) **Other Potential Policy Changes**
- 7 (06:03) **Broader Portfolio and Sector Effects**
+ Full timestamped outline available in the app
Show Notes
Our co-heads of Securitized Products Jay Bacow and James Egan explain why recent U.S. government measures won’t change much the outlook for mortgage rates, home prices and sales this year.
Read more insights from Morgan Stanley.
----- Transcript -----
Jay Bacow: Jim Egan, I see you sitting across from me wearing a quarter zip. As old things become new again, my teenager would think that is trendy.
James Egan: I think this is one of, if not the first, times in my life that a teenager has thought I was trendy, including back when I was a teenager.
Jay Bacow: Well, as captain of the chess team in high school, I was never trendy. But Jim…
Welcome to Thoughts on the Market. I'm Jay Bacow, co-head of Securitized Products Research at Morgan Stanley.
James Egan: And I'm Jim Egan, the other co-head of Securitized Products Research at Morgan Stanley.
Today, we're here to talk about some of the programs that are being announced and their implications for the mortgage and U.S. housing markets.
It's Tuesday, January 20th at 10am in New York.
Now, Jay, there have been a lot of announcements from this administration. Some of them focused on affordability, some of them focused on the mortgage market, some of them focused on the housing market. But I think one of them that had the biggest impact, at least in terms of trading sessions immediately following, was a $200 billion buy program from the GSEs. Can you talk to us a little bit about that program?
Jay Bacow: Sure. As you mentioned, President Trump announced that there would be a $200 billion purchase of mortgages, which later was confirmed by FHFA director Bill Pulte, to be purchased by Fannie and Freddie. Now, we would highlight putting this $200 billion number in context.
The market was probably expecting the GSEs to buy about a hundred billion dollars of mortgages this year. So, this is maybe an incremental a hundred billion dollars more. The mortgage market round numbers is a $10 trillion market, so in the scope of the size of the market, it's not huge. However, we're only forecasting about [$]175 billion of growth in the mortgage market this year, so this is the GSEs buying more than net issuance.
It's also similar in size to the Fed balance sheet runoff, which is something that Treasury Secretary Scott Bessant mentioned in his comments last week. And so, the initial impact of this announcement was reasonably meaningful. Mortgage spreads tightened about 15 basis points and headline mortgage rates rallied to below 6 precent for the first time since 2022 on some mortgage measures.
James Egan: Alright, so we had a 15 basis point rally almost immediately upon announc
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