The Federal Reserve purchased more than $19 billion in agency mortgage-backed securities from government-sponsored entities Freddie Mac (FRE), Fannie Mae (FNM) and Ginnie Mae in the week ending Jan. 21. The latest installment brings total agency MBS purchases to $52.6 billion, little more than a tenth of the Fed's $500 billion purchasing power under the program, which was announced Nov. 25, 2008.
"Spreads of rates on GSE debt and on GSE-guaranteed mortgages have widened appreciably of late," Fed officials said in a media statement first announcing the program. "This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally."
The Federal Reserve Bank of New York announced Thursday details of the purchases completed Jan. 15 through 21 -- together totaling just under $19.01 billion -- with Fannie enjoying nearly $11.71 in purchases, Freddie selling off $5.45 billion and Fannie seeing $1.85 billion in MBS leave its sheets. The Fed so far has purchased $4.25 billion in agency MBS from Ginnie, $20.2 billion from Fannie and $28.17 from Freddie.
If the Fed has directed its purchases based on the strength of GSE issuance, however, it's more than a little bit off. Issuance figures provided to HousingWire in December by eMBS Inc. showed that fixed issuance — which refers to MBS deals backed by fixed-rate mortgage products — in November at Ginnie Mae was $25.6 billion, surpassing both Freddie's $13.7 billion and Fannie's close second of $22.7 billion.
Despite the sizable investments in the GSEs and recent efforts to lower the federal funds rate effectively to zero percent, long-term mortgage interest rates have inched back up past the 5 percent mark for the week ending Jan. 22, according to Freddie's rate survey, and mortgage application volume has dived nearly 10 percent last week, according to the Mortgage Bankers Association. Refinance activity in particular appears to be edging away from recent highs, with refi applications accounting for 83.3 percent of raw mortgage activity -- a decrease from the 85.3 percent reported the previous week, according to the MBA's weekly application survey -- suggesting that the Fed may still have a long way to go to affect the cost and availability of credit to prospective home buyers and struggling borrowers looking to refinance..
Write to Diana Golobay at firstname.lastname@example.org.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.