A change in rules for the most liquid part of the agency mortgage-bond market as Wall Street fights municipal seizures would make even government-backed loans costlier for certain borrowers, according to JPMorgan Chase & Co. analysts, Bloomberg News reported yesterday. The Securities Industry and Financial Markets Association has discussed with its members who set guidelines for to-be-announced (TBA) trading of the debt whether to exclude loans from areas that use eminent domain powers to buy "underwater" mortgages, said Kenneth Bentsen, an executive vice president at the New York-based group. San Bernardino County, California, last month created an authority to consider the action. Excluding loans from the TBA market, where forward sales contracts can be filled with any bonds matching a broad set of characteristics, "would have a significant effect on credit availability for borrowers in these locations," JPMorgan analysts led by Matt Jozoff wrote in a July 13 report.
