Bond funds trading mortgage backed securities, which are in large part ultimately backed by the US taxpayer, don’t want the government backstop to go away.
“The government needs to play a role in housing,” said Daniel Hyman, a money manager specializing in mortgage securities at Pacific Investment Management Co., manager of the world’s largest bond fund. “The way the world is set up, it can’t purchase $5 trillion of additional mortgage assets without government guarantees, or at least certainly not anywhere near today’s prices.”
“or at least certainly not anywhere near today’s prices.” That’s a key point. The mortgage market is dangerously manipulated. Without “government guarantees” the system doesn’t work for Wall Street. Or Newport Beach in this case.