CFPB analyst cites 'profound' mortgage servicer community impact

FHFA reaches $280 million RMBS settlement with Barclays

RMBS settlement total now exceeds $16 billion

Whalen: Nonbanks are taking over mortgage originations

Regulators "get in the way"
W S
Investments

Fed commits to $40 billion MBS-buying program

The Federal Open Market Committee said the central bank plans to continue purchasing additional agency mortgage-backed securities to foster a continuing housing recovery while trying to keep unemployment rates down.

The FOMC made that conclusion after members met this week and decided that the Fed would continue purchasing agency MBS at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion a month.

"Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee continues to see downside risks to the economic outlook," the FOMC said in a statement. 

The Fed’s decision to keep pressing the gas pedal down on its bond-buying program was in line with the majority of market experts.

However, some economists fear that the continuation of the open-ended third round quantitative easing program may lead to a bad economic ending for various income markets. 

"The catalyst for a sooner-than-anticipated end to quantitative easing is strongly improved economic conditions concurrent with any rise in inflation that prompts an 'inflation scare.' It is not even necessary that actual inflation tick up much, only that inflation expectations increase and markets start to fear the end of quantitative easing," said Greg Brown of Smith Breeden Associates.

A sector that could experience a significant inflation scare is agency MBS, which would be hurt by bother higher volatility and lack of Fed buying.

"Higher nominal rates will extend the duration of pass-through securities, but a strong economy will allow many currently constrained households to qualify for refinancing via higher incomes and home prices," Brown explained.

cmlynski@housingwire.com

Recent Articles by Christina Mlynski

Comments powered by Disqus