Tag Archives: Federal Reserve

Federal Reserve Stops Mortgage Purchases

A recent article  from the NPR indicated that The Federal Reserve will stop buying mortgage-backed securities on Wednesday March 31. This marks the end to a massive program that’s been helping the housing market recover.

When the economy showed signs of decline over a  year and a half ago, the government wanted to drive down interest rates for homeowners to stimulate the economy by making it cheaper to buy or refinance a house. The problem was that lenders were not issuing loans, even to homeowners with good credit. As a result, interest rates rose. 

The Federal Reserve aimed to solve this problem by buying up a lot of mortgages. Because of this, they became the largest mortgage-backed security investor in the world. In fact the total amount of mortgage-backed securities now totals more than $1.2 trillion worth in all.

The Fed was buying 90 percent of new mortgage-backed securities and now is only buying about 30 percent or less. As of April 1, 2010 they will stop buying altogether. So the question is what happens then? Barry Habib, chairman of the board of Mortgage Success Source, which tracks rates and trends for mortgage brokers, says that when the Fed stops purchasing these securities, it will leave a vacuum in the market that will push up interest rates.

What many people don’t know or understand is that the government actually has been making quite a bit of money on this program. The U.S. Treasury earns about $50 billion a year from interest that homeowners pay on loans the government owns. However, there is the risk that some of the more than $1 trillion worth of home loans that might go bad.

What Will Spring Bring?

With all the uncertainty swirling just weeks before the spring market, we do know of a certainty that will definitely come with this year’s spring market. The Federal Reserve will cut the rate by at least a half point. This rate cut is expected to take place on March 18th, just 2 days before spring.…

Timing Your Real Estate Purchase

I know it is difficult to sort out all the real estate headlines that hit the press on a daily basis.  Foreclosures, dropping prices, and daily decreases in sales volume!  Many people are asking themselves, “is it ok to buy a home with all of this swirling?”  Absolutely!!  With the shift that has occurred in…