Fed Begins MBS Purchases
Austin Kilgore | 01.05.09 www.dsnews.com
The Federal Reserve Bank of New York began its purchase of $500 billion worth of fixed-rate mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae, and $100 billion in mortgages held by Fannie, Freddie, and the Federal Home Loan Banks Monday.
The New York Fed is handling the transaction for the Federal Reserve, which announced the program on November 25, 2008. It is intended to drive down the price of mortgages and make them more available to consumers.
Since the announcement in November, mortgage rates have lowered and refinancing applications have increased.
“The program stands to drive mortgage rates even lower, possibly to 4.5 percent,” Barclays Capital strategists Derek Chan and Nicholas Strand told Realtor.org.
BlackRock Inc., Goldman Sachs Asset Management, PIMCO, and Wellington Management Co. are working as agents of the New York Fed to make the purchases, according to an Associated Press report.
The mortgages that make up the Fannie and Freddie securities are not pools of sub-prime mortgages and are considered investor-grade because they are comprised of prime mortgages.
Beginning Thursday, the New York Fed will begin providing weekly updates on its Web site with details of the week's activities.
