How Fed Exits MBS Ownership Could be Key to Affordability

Posted To: MND NewsWire

After years of quantitative easing, the Federal Reserve is estimated to own $1.75 trillion in agency mortgage-backed securities (MBS). The securities are issued by Freddie Mac and Fannie Mae (the GSEs), backed by conventional mortgages they aggregate and guarantee, and Ginnie Mae, which does the same for mortgages issued with FHA and VA guarantees. The Fed has been buying agency securities since 2009, moving to keep money flowing into the troubled residential housing finance system. Even after it stopped putting new money into MBS the Fed continued to reinvest funds in the securities as old issues matured or were paid down. The Fed has always said it would not stop its reinvesting until interest rates began to rise. Its Open Market Committee (FOMC) has now raised the fed funds rate three times...(read more)

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