As U.S. loan origination volume slows, the two mortgage agencies, Fannie Mae and Freddie Mac, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp.] have been repurchasing an increasing amount of their own outstanding mortgage-backed securities to expand their retained loan portfolios.

These repurchases have a significant net positive impact on earnings because the income earned on owned mortgages is much higher than that earned on insured mortgages. These transactions effectively move the securities onto the agencies' balance sheets and increase the revenues earned on the underlying loans from roughly 20 basis points (representative of the guarantee fees) to roughly 90 basis points (representative of the net interest spread).

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