Central Bank Prodded by Feds to Sell Some of its Mortgage Portfolio
A large number of officials at the Federal Reserve believe that the sell off should be done in a measured time-frames following the rise of short term interest rates at the Central Bank. This is not the total consensus of everyone involved. Others believe that the introduction of these securities back into the market will not cause the panic that the majority of senior officials at the Federal Reserve believe. Taking extra precautions with this size of sale is important due to the potential ramifications to the market. If wrong, the pinch could be felt by investors and homebuyers in the form of higher borrowing costs.
The discussion over this holly debated issue has been played over and over in official meetings held by the feds. Minute entries from these meeting should be available for public review within the next few weeks.
The mass purchase of these securities was done by the fed in 2009 in an effort to drive down long term interest rates. This was done as part of the Obama Administrations recovery plan, but now there are serious concerns about a federal agency holding such a large amount of securities. Another issue within the debate is the amount of money that will have to be flooded into the market to purchase these securities. The fear is that this flood of cash could affect inflation rates of new homes.
The end goal of the fed would be to sell off a substantial amount of the holdings over the next four to five years. Officials also estimate that a large portion of the holdings will be relocated through refinancing and securities reaching their maturity dates.
For more information about this topic or NewHomesSection check out our New Homes Blog and our Fresh off the PRess section.
The discussion over this holly debated issue has been played over and over in official meetings held by the feds. Minute entries from these meeting should be available for public review within the next few weeks.
The mass purchase of these securities was done by the fed in 2009 in an effort to drive down long term interest rates. This was done as part of the Obama Administrations recovery plan, but now there are serious concerns about a federal agency holding such a large amount of securities. Another issue within the debate is the amount of money that will have to be flooded into the market to purchase these securities. The fear is that this flood of cash could affect inflation rates of new homes.
The end goal of the fed would be to sell off a substantial amount of the holdings over the next four to five years. Officials also estimate that a large portion of the holdings will be relocated through refinancing and securities reaching their maturity dates.
For more information about this topic or NewHomesSection check out our New Homes Blog and our Fresh off the PRess section.
Comments (1)
Interest rates need to rise! Investors in the secondary market aren't going to lender money at these rates and lending will be constrained until rates rise. The lack of debt capitalization is 90% of the problem with the economy right now.
Bryan Hancock, over 14 years ago