Maureen Megowan's Blog

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Fed Extends Mortgage Purchase Program

A few days ago, I posted a blog entry What Happens when Uncle Sam stops buying mortgages??? where I discuss the increase in interest rates that the mortgage market will experience when the Federal Reserve finally stops its purchase of mortgage backed securities from Fannie Mae and Freddie Mac.  The $1.25 billion Fed mortgage purchase program was scheduled to end by year end.  Most of the capital that is going to originate new mortgages is coming from the Federal governemnt, and until individual investors begin to invest again in mortgage backed securities, or banks are again willing to hold mortgages on their own balance sheet, interest rates may rise substantially when the Fed ends its mortgage security purchase program. It has been estimated that mortgage rates today would be at least two-tenths to a half percentage point higher without the Fed mortgage backed securities purchae program.

Yesterday, the interest rate markets got a short term reprieve when the Fed announced that they would extend their purchase of mortgage backed securities through March of next year This will allow a few more months for the Fed to ease out of the mortgage backed securities market and allow some additional time for the private capital markets to re-establish themselves.

For more information about Palos Verdes and South Bay Real Estate and buying and selling a home on the Palos Verdes Peninsula, visit my website at http://www.maureenmegowan.com . I try to make this the best real estate web blog in the South Bay Los Angeles and the Palos Verdes Peninsula. I would love to hear your comments or suggestions.

Comment balloon 2 commentsMaureen Megowan • September 25 2009 02:04PM

Comments

This is great news for all.  It will allow the rates to stay low at least until March barring a catastrophe.

Posted by Ellen Crawford, Alpharetta Real Estate Agents & Alpharetta REALTOR (Crye-Leike REALTORS®) about 9 years ago

From what I have heard, while they will be extending the program they have not committed any additional funds to purchase mortgage backed securities. Thus, we will see a more immediate increase but it should not be as dramatic.

Posted by Ryan Frost (Compass Lending Solutions, LLC) about 9 years ago

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