Bloomberg, July 1, 2021, The Real Lender on Your Mortgage Could Be the Federal Reserve
Why, again, is the Federal Reserve adding $40 billion a month to its holdings of mortgage-backed securities when the mortgage market doesn’t seem to need any federal assistance?
After all, the national average for a 30-year fixed-rate mortgage loan is 3.02%, according to the latest survey by mortgage buyer Freddie Mac Corp. That’s up only a bit from its historic[MAKE THIS ALL-TIME? HISTORIC IS A BIT VAGUE I THINK (AND REPS IN A SECOND)] low of less than 2.7% in January and February. Cheap loans are fueling a historic[KEEP THIS ONE!] rise in home prices that’s making homeowners rich on paper but crushing would-be first-time buyers: The S&P CoreLogic Case-Shiller index of U.S. property values climbed 14.6% in April from a year ago, the biggest gain in data going back to 1988.
When you get a loan from a bank or a nonbank lender, there’s a good chance it will be packaged into a mortgage-backed security and sold to investors, and there’s a good chance the ultimate holder will be the Federal Reserve. Which means the Fed could be financing your mortgage. In the week ended June 23, the Federal Reserve owned $2.35 trillion in MBS, according to the Fed’s H.4.1 statistical release. The Securities Industry and Financial Markets Association (Sifma) reports there were $8.44 trillion in the securities guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae at the end of 2020, meaning the Fed owns more than a quarter of the MBS market.