FED Update: $34 Billion Left To Spend! 4 Weeks To Go
Mortgage rates reversed course again during the week ended March 4th with the 30yr FX following below 5% according to Freddie Mac’s weekly survey (www.freddiemac.com). According to said survey the national average is 4.97% at .7pts. For first-time home buyers, the fourth quarter of 2009 was the third most affordable quarter since 1981 behind the first and second quarters of 2009.
At week ending last week the Federal Reserve reported a week purchase of $10 billion dollars worth of Agency mortgage backed securities (MBS). This represents a $1 billion decline from the previous three week average. The goal of the Federal Reserve’s agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally.
Since the inception of the program in January 2009, the Fed has spent $1.22 trillion in the agency MBS market, or 97.3 percent of the allocated $1.25 trillion, which is scheduled to run out at the end of this month. With four weeks left in the program there is now only $34.08 billion in funds remaining.
So far the gradual reduction in the Fed’s weekly purchases has been counterbalanced by the slowdown in new loan production. If remaining funds are spread out equally over the next 4 weeks, soon there will not be enough $$$ to offset average new loan production supply from originators (currently running under $2 billion per day).
***The Fed’s exit from the MBS purchase program has economists predicting the average 30yr Fixed Rate Conforming Mortgage to rise to 5.50%.
Thad Musser is a lender for First Savings Mortgage in Northern VA.
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