Tens of thousands of homeowners refinanced their mortgages to take advantage of lower interest rates, reducing the expected return on Fannie and Freddie's asset portfolios and creating a bigger mismatch between the maturities of their assets and liabilities.

Question

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When homeowners refinance their mortgages to take advantage of lower interest rates, the existing mortgages (assets) held by entities like Fannie Mae and Freddie Mac are paid off early. This reduces the yield on their asset portfolios because the new mortgages are at lower interest rates. Additionally, this can create a mismatch between the maturities of their assets (now shorter due to refinancing) and their liabilities, which can remain fixed, leading to financial management challenges.

Tens of Thousands of Homeowners Refinanced Their Mortgages to Take