Buyback FNMA Mortgage at less than face value

[Ryan Underwood]

The face value of any given mortgage note hinges upon a few things, but lets consider it's a 1) conforming, 2) performing, and 3) in the green meaning favorable LTV.

Now let's assume it's a 15yr conventional mortgage @ 2%, which until recently was readily available for qualified borrowers. That mortgage is no longer worth what it was originally valued at. With the runup in rates (2-3x the 2% mentioned), how would one buy their mortgage back at less than face value?  The rise in rates should have reduced the face value of the note, especially relative to new notes...

This was apparently possible in the 80s when banks held the notes - they wanted the money back to lend out at MUCH higher rates. With most loans federally backed (if that's the right term) is this even a thing? 

[Daniel Johnson]

This is no longer a thing. Nearly all mortgages now are packaged and sold as mortgage backed securities(MBS). There is actually no incentive for the "lender" to sell back the loan to you as the portfolio discounts are already priced into the value of the bonds based on the duration and risk of the portfolio. The long and short is that you don't have a single owner of your mortgage anymore and the servicer wouldn't have authority to sell a mortgage from the portfolio. Authorization for this would likely have to come from a director of the fund, and good luck getting them to sign off on selling your $200k mortgage at a discount to face.

Good thoughts, but nearly impossible now a days!