Foreign ownership of U.S. mortgage-backed securities (MBS) has reached a critical juncture, currently totaling $1.32 trillion, which represents 15% of all outstanding MBS. Major holders include Japan, China, Taiwan, and Canada. Concerns abound regarding these nations potentially liquidating their MBS holdings as a reaction to U.S. trade policies, particularly amid rising tensions due to tariff implementations. Experts highlight that aggressive actions by countries, especially China, may target U.S. mortgage rates to exert economic pressure, especially as housing markets face existing challenges.

The possibility of increased selling of MBS by foreign investors is raising alarms within the mortgage industry, with implications for mortgage rates and the broader housing market. Analysts indicate that if significant holders like China and Japan accelerate their divestitures, it could widen mortgage spreads, leading to steeper borrowing costs. As the spring housing market contends with high home prices and declining consumer confidence, heightened foreign sell-offs could exacerbate these issues, deterring potential buyers amidst a landscape marked by economic uncertainty.

– **Current Foreign Holdings**: Foreign countries own $1.32 trillion in U.S. MBS; major holders include China and Japan.
– **Trade Policy Concerns**: Potential retaliatory selling of MBS by China in response to U.S. tariffs presents risks to mortgage rates.
– **Market Impact**: Accelerated foreign sales of MBS could widen spreads, increasing mortgage costs and complicating the housing market.
– **Consumer Sentiment**: High home prices and low confidence are pressuring potential buyers, with some considering selling stocks for down payments.

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