The Treasury will begin selling off its $142 billion portfolio of agency-guaranteed mortgage-backed securities (MBS), the department announced yesterday. The securities will be sold at a rate of up to $10 billion dollars per month, beginning this month, with specific monthly amounts dependant on market conditions.

The Treasury acquired the portfolio in 2008 and 2009 in an effort to provide stability to markets in the face of the financial crisis. It has decided to sell securities now because “the market for agency-guaranteed MBS has notably improved along with broader financial conditions since Treasury acquired the portfolio,” it said in a statement.

Combined with principal repayments, which currently range from $3 billion to $5 billion per month, the sell-offs could extinguish the portfolio in about a year, the Treasury statement said.

“We will exit this investment at a gradual and orderly pace to maximize the recovery of taxpayer dollars and help protect the process of repair of the housing finance market,” Mary Miller, the Treasury’s assistant secretary for financial markets, said in a statement.

The department offered reassurance that the sales are expected to have a “minimal impact" on both the mortgage bond market as well as on mortgage rates. 

Sales of the securities are expected to raise between $15 billion and $20 billion of additional revenue for taxpayers, according to Treasury officials. However, that amount could still prove short, as the Federal Housing Finance Agency has projected that the total cost of bailing out Fannie Mae and Freddie Mac could run up to between $142 billion and $259 billion through 2013.

State Street Global Advisors, who the Treasury retained in 2008 to oversee its agency-guaranteed MBS portfolio, will manage the sales, the Treasury statement said.

Claire Easley is senior editor, online, at Builder.

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