Posted on 04/02/2010 12:15:41 PM PDT by Faketan
For over a year, the Federal Reserve has been pouring money into American mortgages. Buying "mortgage-backed securities" (MBS), financial instruments whose value is based on a pool of underlying mortgages.
When the financial crisis broke, the market for MBS dried up. Buyers feared that homeowners would default on their mortgages. Driving the value of these assets to almost nothing, or worse.
Financial institutions in America and around the world were left holding trillions of dollars worth of non-saleable MBS. It appeared these holders would be forced to mark down the value of their MBS holdings, potentially triggering another wave of bank (and pension fund, insurance provider, etc.) failures.
The Fed moved decisively to prevent this. Stepping into the MBS market and buying hundreds of billions of dollars worth of MBS weekly in early 2009. Taking these assets off the hands of financial groups.
Of course, to pay for these purchases, the Fed created new money. MBS purchases are one of the major items responsible for ballooning the U.S. monetary base by $1.2 trillion since October 2008. Full article at: Mortgage Market
(Excerpt) Read more at oilprice.com ...
In that case expect inflation.
“The U.S. Government Will No Longer be Propping up the Mortgage Markets.”
Obama announces scheme to have government just take over all mortgages.
/sarc, hopefully
Funny, that.
I refinanced my mortgage with Wells Fargo (the original holder) and just got notified that it was sold to Fanny Mae, although WF will still service it.
I have an exceptional Credit Rating - why would WF sell a sure money-maker?
Anyone out there care to field that question?
Gives them more capital to re-lend, offloads the risk of default. Loan origination and servicing can be very profitable.
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