The mortgage industry received some very big news today with the announcement that the Federal Reserve would purchase up to $600 billion of debt to boost the mortgage bond market.  The Fed pledged to buy $500 billion of mortgage-backed securities (MBS) and $100 billion in direct debt of Fannie Mae and Freddie Mac.

The move had an immediate impact, with the 30-year mortgage rate plunging about 0.75 percentage point to 5.5 percent, according Bankrate, Inc.

“They are getting to the heart of the (housing) problem — it’s clean, it’s quick, it’s direct,” said Todd Abraham, co-head of government and mortgage assets at Pittsburgh-based Federated Investors, Inc. which invests $344 billion. “It’s a good way to bring down mortgage rates.”

On an announcement posted on its website, the Fed said, “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.”

Click here to see the full article, “Fed engineers mortgage rate cuts, refinancings” at Reuters.com

Filed under: Economy, Financing, Investment Property