Fed to buy $40 billion in mortgages per month to aid real estate recovery, economic development
The U.S. Federal Reserve has announced its latest action to stimulate the economy: it will purchase $40 billion in mortgage backed securities per month. It will also continue with its “operation twist”, in which it swaps short-term government bonds for long-term securities.
According to Fed Chairman Ben Bernanke, the Fed’s actions will stabilize the mortgage market, spur a real estate recovery, and keep a low interest rate environment. In total, the Fed will increase its longer-term holdings by about $85 billion per month.
The Fed is acting with its third round of Quantitative Easing, or bond buying, in response to slowed U.S. economic growth and its unemployment situation, which has remained stubbornly above 8 percent.
The program is “open ended”, giving the Fed the ability to act until it is satisfied that conditions have improved.
Stock markets jumped at the announcement, and the Dow is up over 100 points.
We will have more on this development, updated rates, and the take from Mortgage Matters hosts (and Central Coast Lending owners) Dan Podesto and Jason Grote as the day progresses.
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