Fed Boosts Mortgage Industry,Hands Consumers Lower Rates
The Federal Reserve just announced this morning that it would purchase $600 Billion of Mortgage-Backed Securities (often referred to as MBS) backed by Fannie Mae, Freddie Mac and Ginnie Mae. This action is “being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” said the statement from the Fed.
In plain English, the Fed is doing this to help increase availability of credit while lowering fixed mortgage rates. Secretary Paulson noted in his press conference this morning (which is still ongoing as I write this) that increased liquidity and lower rates in the housing market would go a long way toward stabilizing the economy. I couldn’t agree more!
In addition to purchasing the MBS debt, the Fed will set up a $200 Billion program to support consumer and small-business loans. This is specifically designed to create liquidity in the auto, small business and student loan markets.
This means consumers BIG opportunity to grab a lower rate RIGHT NOW…
The Fed’s move is already lowering mortgage rates this morning as the mortgage bonds are trading up over 100 basis points (note that prices and rates move in opposite directions…so a move UP in prices means a move DOWN in rates) which is significant. This is a GREAT opportunity for home buyers to take advantage of lower rates that we will see because of this historic move!
Stacey Fleece is a Mortgage Loan Consultant with Countrywide Home Loans in Mill Valley.
Tags: Mortgage Rates
-
Jason
With the Treasury Secretary on his spending spree he surely isn’t trying to get a good return on the tax payers’ investment. The bailout was to buy up bad mortgage debt but it never did. What is the purpose of the fund? Paulson’s has warrants on many banks and they average 1 – 3 percent when enacted. Yet the cash investment is about 20 percent of the market cap. Maybe the next Treasury Secretary will be less erratic.
-
StaceyFleece
I certainly would not disagree. It was disappointing to see Paulson and his team back track on the original plan to buy bad mortgage debt and get it off the books of banks who are required to mark-to-market daily. This mark-to-market issue was causing them to look overleveraged on paper and was contributing to bank failures and forced sales. However, I feel this most recent move was the first thing I saw them do as part of the bailout plan that has the potential to filter down to the consumer/individual and benefit them with potential lower rates.
Leave a Reply
Additional comments powered by BackType
2 Comments »