by qrono
25. September 2009 04:36
The Federal Reserve (Fed) had proposed last year – when the credit crisis peaked -- to buy as much as $1.45 trillion worth mortgage securities in 2009 in order to keep borrowing costs low for homeowners. The central bank has bought $775 billion worth of both mortgage-backed securities and debt from Fannie Mae, Freddie Mac and Ginnie Mae so far. The program, which was set to expire at the end of this year, has been extended through the first quarter of 2010. By slowing down mortgage purchase, the Fed hopes to avoid a sudden hike in borrowing rates if the Fed were to get out of the market all of a sudden. The Fed’s “primary goal is to avoid a shock to the market by suddenly shutting the programs down all at once,” said Christopher Low, chief economist at FTN Financial. As the Fed slows purchases, “they’re hoping other buyers will step in to avoid a sudden increase in mortgage rates,” said Low. Guy Cecala, publisher of Inside Mortgage Finance, expects rates for home loans to stay low “in the 5 percentage range” even though the Fed will slow its purchase of mortgage securities.
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