The price of debt from Fannie Mae and Freddie Mac has fluctuated wildly in June, as the benchmark 10-year Treasury and spreads bob up and down.

Oon the Standard 10-year loans from the agencies were priced in the low- to mid-6 percent range around June 11. A week later, the rate was down in the 5.5 percent to 6 percent range.

What’s driving the volatility? The yield on the 10-year Treasury has risen steadily all year, from 2.2 percent in mid-January to a high-water mark of around 3.93 percent on June 10. But in the past week, the benchmark fell about 30 basis points (bps) before rising another 20 bps.

What’s more, investor demand for Fannie Mae’s Mortgage Backed Securities (MBS) continues to heat up, lowering spreads and driving more competition between the agencies.

Freddie Mac continues to win a lot of business through its adjustable rate program, which has featured rates well inside of Fannie’s adjustable rate program for most of the year. Though rates on Freddie’s adjustable deals have risen in June—from a start rate of 3.5 percent to a start rate of 4.25 percent (with a 7 percent cap), the pricing still remains inside of Fannie by about 65 basis points as of June 18.

On fixed-rate loans, Freddie is picking its spots. For deals that Freddie likes, it can offer rates well inside of Fannie's, but many standard deals are still going Fannie’s way, thanks to the lower spreads resulting from MBS investor demand.

Part of the flux can also be attributed to a recent underwriting changes at Fannie Mae: The agency further tightened their credit standards yet again.

The changes included a reduction in the availability of Interest-Only (IO) periods. “They pretty much almost entirely went away with IO,” says John Barbie, a vice president at Pittsburgh, Pa.-based PNC ARCS. “You can still get maybe two years of IO on a 10-year deal, but only if you’re low leverage and at a 1.35x debt service coverage ratio or better.”

Another change is that 10-year deals now have an underwriting floor of 5.75 percent for loans of above 65 percent loan-to-value. The floor is used only as a means for sizing the loan, and borrowers can still get an all-in rate below 5.75 percent. But this new floor will likely constrain proceeds for many borrowers. 

Fannie Mae also recently toughened up on supplemental loans. In the past, borrowers could get two supplemental loans during the loan term and then one more supplemental loan would be available for whoever assumed the loan. But Fannie now holds the line at one supplemental loan per original borrower and one more with an assumption.