Why is the Fed’s unlimited support essential to the mortgage industry?
April 28, 2020
In today’s Daily Download episode, HW+ Managing Editor Brena Nath interviews HousingWire’s Kathleen Howley on how Federal Reserve Chairman Jerome Powell rescued the mortgage market, initially announcing plans on March 15 to buy bonds in the form of $500 billion in Treasury bills and $200 billion of mortgage-backed securities.
On a Sunday night call with journalists in mid-March, four days after the World Health Organization had labeled COVID-19 an “alarming” global pandemic, Federal Reserve Chairman Jerome Powell laid out his plans to rescue the U.S. economy.
Powell started by expressing concern for the victims of the coronavirus and for the harm caused by the economic shutdowns, describing the “stay at home” orders being issued by state governors as “essential for containing the outbreak.”
He also announced more than half a dozen new measures the Fed would employ to buffer the economic blow of the shutdowns, including the Fed’s biggest foray into the bond market in over a decade.
The bond-buying would take the form of $500 billion in Treasury bills and $200 billion of mortgage-backed securities, Powell said on that March 15 call.
Both would support the mortgage market because the investors who decide what yield they’re willing to take for MBS – and thus what interest rate borrowers pay for home loans – benchmark their decisions off the yield for long-term Treasuries, especially the 10-year bill. Yields shrink when competition for bonds goes up.
The Daily Download examines the most captivating articles reported from the HousingWire newsroom. Each afternoon, HousingWire provides its readers with a deeper look into the stories that are not only chronicling the biggest announcements within the housing finance industry but are also helping Move Markets Forward. Hosted by the HW team and produced by Alcynna Lloyd.
HousingWire articles covered in this episode:
