Fed Spends $10.2 Billion, Mortgage Rates Fall

January 9, 2009

Finance

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Federal Reserve Bought Mortgage-Backed Securities to Try to Reduce Mortgage Rate

Bloomberg.com is reporting that the Federal Reserve has bought $10.2 billion of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities. According to the New York Fed’s Web site they bought $6.9 billion of Freddie Mac securities, $2.9 billion of Fannie Mae bonds and $450 million of Ginnie Mae debt.

Mortgage-backed securities are bundles of mortgages. The value of these securities comes from the flow of payments being made on the principal and the interest of the mortgages in the bundle. Many people, facing a combination of personal economic problems and rising payments on their adjustable-rate mortgages are not able to make their payments. This results in the securities being worth far less and the institutions that hold them unable to do anything.

The $10.2 billion purchase is one of the steps taken this week in a program attempting to lower mortgage rates. It appears that the program is working. It is being widely reported (WSJ, MSNBC, Reuters, NYT…) that mortgage rates are falling, and are currently at around 5%. Many experts are predicting that the rates will go as low as 4.5%

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About Rod Holmes

Rod has been a broker working in Chicago since 2004. He has worked with developers, buyers, sellers, and as well as managing offices. He is currently a partner in Chicago Style SEO working primarily with real estate firms to improve their Internet marketing. Rod lived for nearly ten years in Japan where he owned a corporate training and executive coaching firm with clients including Hitachi and 3M Japan.

He lives in Lakeview with his wife and two children. He enjoys coaching and watching his kids participate in sports, cycling, camping, and traveling in general.

You can find Rod online on Twitter at @roddesu, Facebook and LinkedIn.

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  1. Chicken Little Has Come Out and Said the Sky is Falling! | The Chicago 77 - February 22, 2010

    […] of the FOMC meeting had a lot of back and forth on when and how the Fed will sell $1.25 trillion of mortgage-backed securities. If the Fed were to dump all of these securities today, it would raise the rates on new […]