By AL YOON
NEW YORK—Investing in the $5 trillion agency mortgage-backed securities market has long been a technician’s game, with statistics and mathematical formulas frequently guiding investor decisions.
But the last few years have seen greater uncertainty in predicting key variables—in particular how fast homeowners will repay their loans—because federal policy makers have repeatedly changed the rules of the mortgage game via the Obama administration’s ad hoc remedies to housing-market woes.
This has led dealers to retool, and investors to rethink, the mathematical models that for decades have sought to identify the most profitable bonds and warn against clunkers.
FTN Financial mortgage strategist Walter Schmidt said an investor joked to him that one way to improve models would be to add an “Obama button” that could magically factor in the effect of White House policy changes wrought through the government’s control of housing-finance giants Fannie Mae and Freddie Mac.
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