Fed Purchases Of Mortgage Backed Securities To End

The Federal Reserve Bank will discontinue buying mortgage backed securities in March 2010.  The Federal Reserve has been actively supporting the treasury and mortgage markets with purchases of treasuries and mortgage backed securities since fall 2008.

This could have an impact on the mortgage climate for the foreseeable future.  A Morgan Stanley chief economist feels treasury yields are likely to move up 40%… which could send the 30 year fixed mortgage rate up to 8%.

In September 2008 when the financial crisis became critical, banks held in their reserves close to $45 billion.  That climbed to $900 billion in only 4 months with the help of federal bailout dollars.  The Federal Government anticipated more assistance from the banking industry but instead have seen the banks shift their focus inward leaving unemployed homeowners holding the foreclosure bag.

Mortgage backed securities (MBS), first developed in the 1970’s, are bundled mortgages that originating institutions sell to the credit markets to obtain the capital to make new commitments and to remove the original loan from their books.  If buyers do not come forward to purchase these mortgage backed securities, the funds available for mortgage lending will decrease and consumers will find it more and more difficult to obtain a fair interest rate loan through any financial lender.

Related posts:

1. Mortgage Rate Falls Again
2. 30 Year Mortgage Rates Fall Below 5%
3. Federal Reserve Move Lowers Mortgage Rates Below 5%
4. Mortgage Rates Jump
5. Higher Mortgage Rates Possible

Comments

• Recent Posts

  • Is The Canadian Housing Market Sustainable?
  • ‘Seasonality Disorder’ In The Housing Market?
  • FTC Proposes Up-Front Fee Ban for Mortgage Modifications
  • Coalition Proposes Mortgage Principal Reduction Plan
  • FHA Announces Tighter Restrictions On Lending

• Sponsored by

• Archives

  • 2010
  • 2009
  • 2008

• Blogroll

  • Debt Consolidation Solutions