Submitted by WSN_Staff on Mon, 01/25/2010 - 13:03.
The Fed looks is set exit the housing market and follow through with its pledge to do so. The impact of this to Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) are not exactly certain. Most Fed officials believe the withdrawal will result in only a modest rise in mortgage rates, and other officials are worried the economy is still too fragile, while yet others think the Fed's making the classic mistake of too much, too soon.
(Washington Post) - For more than a year, the government pulled out the stops to revive home buying by driving down mortgage rates. Now, whether the housing market is ready or not, the government is pulling out.
The wind-down of federal support for mortgage rates, set to end in two months, is a momentous test of whether the Obama administration and the Federal Reserve have succeeded in jump-starting the housing market and ensuring it can hold its own. The stakes for the economy are massive: If the market again falls into a tailspin, homeowners could face another wave of trouble, and it would deal a body blow to President Obama's efforts to get the economy on track.
Keeping the mortgage rates at historic lows, which required a commitment of more than $1 trillion, was viewed within the administration as a central plank of the economic strategy last year, senior officials said. Though the policy did not attract as much attention as rescue efforts to bail out banks, it helped revitalize home buying in some parts of the country and put money in the pockets of millions of homeowners who were able to refinance into lower monthly payments, the officials added.
Read more at the Washington Post, including how the mortgage market trading works in ?Filling in the void? and then the Fed?s ?Exit Strategy?.
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