Treasury Notes

 Update on Treasury’s MBS Wind Down – Taxpayers Recoveries Reach 70 Percent Milestone

By: Matthew Rutherford

Today, Treasury is providing an update on the continued orderly wind down of its agency-guaranteed mortgage-backed securities (MBS) portfolio.

The report  that Treasury is releasing today shows that:

  • During the month of July 2011, taxpayers received an additional $12.7 billion in proceeds from this investment through sales by Treasury with a market value of $10.5 billion ($10.0 billion principal value) and principal and interest payments of $2.2 billion.
  • Through the end of July 2011, taxpayers have received a cumulative total of $159.5 billion in proceeds from this investment through sales by Treasury ($45.5 billion) and principal and interest payments ($114.1 billion).
  • The remaining amount of principal outstanding in Treasury’s MBS portfolio is $82.7 billion. Treasury made an original investment of more than $225 billion in agency-guaranteed MBS.

Treasury has now recovered more than 70 percent ($159.5 billion) of its original $225 billion investment in MBS, which it made during 2008 and 2009 through authority provided to it by Congress under the Housing and Economic Recovery Act of 2008. These MBS purchases helped stabilize the financial markets and preserve access to mortgage credit during a period of unprecedented market stress.

The MBS market has improved considerably since Treasury purchased these securities. Based on current market conditions, Treasury expects to make a profit for taxpayers on this investment.

On March 21, 2011, Treasury announced that it would begin the orderly wind down of its MBS portfolio. Treasury plans to sell up to $10 billion MBS (principal) per month, subject to market conditions. The sale is part of Treasury’s continued efforts to wind down emergency financial crisis response programs that were put in place in 2008 and 2009.

For additional details on Treasury’s remaining MBS portfolio, please visit link.

Matthew Rutherford is Deputy Assistant Secretary for Federal Finance.

Posted in:  Mortgage-Backed Securities
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