Skip to comments.Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates
Posted on 09/13/2012 11:01:38 AM PDT by Free ThinkerNY
The Federal Reserve fulfilled expectations of more stimulus for the faltering economy, taking aim now at driving down mortgage rates.
The Fed said it will buy $40 billion of mortgages per month in an attempt to foster a nascent recovery in the real estate market. The purchases will be open-ended, meaning that they will continue until the Fed is satisfied that economic conditions, primarily in unemployment, improve.
There's strong hints that they'll do Treasurys next," Joe LaVorgna, chief economist at Deutsche Bank Advisors, said in a phone interview from London."They're pulling out all the stops to try to get this economy to gain some traction and, most important, to get unemployment down."
Enacting the third leg of quantitative easing will take the Fed's money creation past the $3 trillion level since it began the process in 2008.
"The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions," the Open Market Committee said in a statement.
(Excerpt) Read more at finance.yahoo.com ...
It’s so reassuring, knowing that our nation’s money supply is in the hands of Ivy League grads who know more than everyone else.
Yeah...right. We are in what’s called the Keynesian Liquidity Trap which makes monetary policy totally ineffective. All monetary policy can hope to do here is raise prices. What’s called for is fiscal policy. In this case, since the previous stimulus spending was a total bust, what’s needed is a massive tax cut to shift the IS curve outward. I don’t think the people in Washington have the stones to do it.
yeah...they’re gonna get those mortgages OFF the banks’ books
before they all blow this fall
Tax cutting is reliquishing power to the “little people” and that can’t be allowed. The insiders want power and want to keep power. Obama is now beholding to useful idiot bernake. Obama does not share power.
So does this mean some people will now send their mortgage payments to Bernanke?
I know stimulus like this is a bust...but in the mechanics of it, what does it mean will happen?
A ridiculous Keynesian type policy.
Don’t think this will have a huge impact on the economy or the real estate market. Some of that depends on WHICH mortgages they go after. Ideally, if they buy up a mortgage there is something of value attached to that mortgage. If the process happens as I expect though, a bunch of Dem cronies will be selling off mortgages for badly-overvalued propoerties, and the only benefit the country will see is... nothing.
The Bernank is now “all in” with Obama.
He has pulled out the stops and is trying to buy Obama the election with printed U.S. currency.
If the Bernank loses, he is done as is the Fed’s “dual mandate.” Let’s hope he loses and we can get our currency back.
30 year fixed mortgage is at 3.25% - how much lower do they want it ?
That is the intent. The mechanism is devaluation precipitating the price rise you noted. That effectively means the debt is devalued and when there is enough debt devaluation to be comfortable the QE can cease. It is the only way the debt can be reduced. There will not be adequate growth or revenue to pay it off.
“yeah...they’re gonna get those mortgages OFF the banks books”
You got that straight. Phony MBS paper makers, with no collateral. (and their so called “insurance” company backers and equity holders.)
They’re chompin-at-the-bit, to get hold of everyones wallets with Extortion-Care, as soon as possible.
What will FedGov do once they hold paper on poor underclass borrowers?
This is a bogus claim.
Mortgage rates are within a historically lows range.
Buying a home in the Carter years you were lucky to get a mortgage at 10%.
The real reason for this is to make Obama look good until the morning of November 7th and everyone knows that to be the truth.
Up next.. releasing the strategic petroleum reserves to get gas down below $4 per gallon in time for elections.. but as many here keep stating, Romney would be worse.. (sarc)
Have a friend making on offer on a repo right now,she got a 30 year fixed at 2.5%.
Au and Ag are nice investments in climates like this.
What a bunch of fools.
I wonder what will happen when FedGov owns 80% of all the mortgages? That’s a lot of power.
“obozo re-elected in a landslide. Free skittles for all!”
So, with QE-3, Helicopter Ben is buying up mortgages to benefit a privileged class (homeowners) and discriminate against others.
You might want pick up some Pb !
Never thought I would miss the Carter days, but more things like this make me wax rhapsodic for those good old days (both equally incompetent, but at least Carter wasn’t determined to destroy the country)
But I still can't believe it happened and is so blatant an effort to prop up a communist pos like obama
I suppose by October they'll tap the strategic petroleum reserve to knock down the price of gas below $4 a gallon
God Help Us all
Excellent asset protection program suggestion.
Aren’t mortgage rates already ridiculously low?
hw many of those loans will be converted into never pay back loans? IOW a loan will be “modified” into a $0 dollars per month payment and declared a performing loan.
Disgusting. Will this help re-elect Obama, or will it possibly backfire?
I think they already do. Probably even higher for student loans, and going higher.
Mortgage rates are at record lows. Why is this necessary? How much lower can the rates go?
We’re be stimulated on again.
I talked with the bank that holds our morrtgage about refinancing using the gov’t HARP program. We bought about 3 years ago @ a 5% interest rate, but if we could get a lower rate would save a lot of money over the long term. We have an almost perfect credit score and they quoted us a rate of 4.625%. I didn’t understand it being so high.
$40 billion a month is $480b a year!!
The economy is $15,090 billion a year. This is 3.2% of GDP!
Without QE, the official numbers would show recession.
WE ARE IN A RECESSION, FOLKS!
Romney/Ryan, is your staff reading this? Please get the word out to the sheeple during the debates!!
Part 2 of the September surprise.
How low can mortgage rates go?
Bloomberg.com currently has the 30 year fixed at 3.57% and the 15 year fixed at 2.93%.
I do not see how this will start a building boom, but I do see how it can start a refinancing boom, and each refinance is a host of fees, points, and etc. that probably net a bank a percentage or two of the refinance.
I also see how it could unstuck the used home market with used homes at lows and rates at lows. Qualifying for the loan is an issue, but with lower monthly payments more will qualify. It really strikes me as a buyers market.
So, how low will the rates go?
Also, and sadly, where is the Fed getting all this money?
Inflation is going to take off crazily at some point. We can only hope that wages match it when it finally strikes. They normally don’t.
Got a mirror?
Where ? - please tell
Ok, so we FINALLY just outright buy the houses for these people that should have never been given a loan in the first place. Except we took the long way around and NO ONE has any jobs! Thanks BARNEY!
I think in this case a lot them weren't sending in their mortgage payments.
You post works for 30 second soundbites on the political trail for Romney/Ryan and their surrogates.
Contemplate that the $480B is going to free up large amounts of tier 3 reserves for banks, for what ever portion of the mortgage portfolios are bought from banks and not from Fannie/Freddie/Ginnie.
In the end though, we’re shifting chairs on the deck of the Titanic, taking FedGov backed mortgage portfolios off the Fannie/Freddie/Ginnie balance sheet and putting the same portfolios on the FedGov backed Federal Reserve balance sheet is just more of the privatising the upside and shifting the downside to the public treasury.
Well it’s one two three, what are we fighting for...
Bank originates a mortgage, bank packages mortgage, banks sell conforming mortgage portfolios to Fannie/Freddie, banks sell non-conforming mortgage portfolios to Federal Reserve, Fannie/Freddie sell mortgage portfolios to Federal Reserve.
Besides adding another top layer of complexity, this isn’t going to do much to increase velocity or quantity of money.
Reagan years too. I bought my first house in 1987 with a 30yr mtg at 10%.
LOL. They wish! I ain't got it.
The only thing I can think is that they print it or simply declare that they have "reserves" whether they do or not.
Do they tell the Treasury to print? Is that the way this works?
The money isn’t coming from us... they’re creating it out of thin air (devaluing our savings in the process).
I’m in a special situation with an ARM that can adjust up to 7%, which is still lower than I bought my first house at in the 90’s.
Do they print more money? Do they simply declare that they have it?
This is the FedPAC’s contribution to the Obama campaign. It makes no economic or constitutinal sense for the federal government to be a mortgage broker.