On Wednesday the Federal Reserve concluded their two day meeting.  From their announcement (see below) it appears that they have agreed to increase the purchasing of Agency MBS (FNMA/FHLMC/GNMA) by an additional $750 billion for a total of $1.250 trillion.  This should ensure that the Fed will be supplying a stable source of funds for the government and conforming loan markets for at least the next 9 – 18 months.  As we have seen since December, the Fed seems to have patterned it’s buying of mortgages to keep rates in the high 4% to low 5% range.  It appears that we should have rates at these levels for some time.

Additionally, the Fed has indicated that they will expand the Term Asset-Backed Securities Loan Facility (“TALF”).  Previously the Fed has indicated that the TALF could expand to include purchasing private MBS (Jumbos) and with today’s announcement it appears that is likely to be the case.  While we don’t see Jumbos rates dropping on the magnitude of what we saw with conforming, this is welcome news.

All positive developments!  I will forward additional information as it is available.  


Text of FOMC statement

WASHINGTON (MarketWatch) - The Federal Open Market Committee released this statement Wednesday following a two-day, closed-door meeting.

For immediate release
Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract. Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession. Although the near-term economic outlook is weak, the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve's balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets. The Committee will continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of evolving financial and economic developments

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen. End of Story