Fed intends to invest $800 in order to revive economy
The Federal Reserve has recently come up with an initiative to revive the weakening economy by investing $800 billion into the troubled mortgage and credit markets. As per the initiative, the Fed will be buying $100 billion in debt and $500 in mortgage-backed securities guaranteed by Freddie Mac and Fannie Mae.
The problem is, investors are no longer willing to buy mortgage backed securities that Freddie Mac and Fannie Mae have purchased because they’re uncertain over what the market would turn out to be. Hence the initiative is being taken by the Fed to save an ailing economy.
Apart from the Fed buying Fannie Mae and Freddie Mac loans, they would also get together with the Treasury in order to create a $200 billion program. This program would help them purchase securities backed by auto loans, student loans, loans for small business and various other forms of credit. The effect of the plans announced by the Fed and the Treasury is quite evident as these have helped bring down interest rates on mortgages.
Rates on 30 year mortgages have dropped down by half a percentage point to 5.75% and it is expected that rates may go even lower. This is expected to help buyers seek conventional loans or refinance their adjustable rate loans into fixed rate mortgages.
Let’s hope that people can get out of the mortgage mess and refinance into better deals thereby helping to reduce the housing crisis that has gripped the entire nation.
Technorati Tags: fed and freddie mac, revive economy
February 19th, 2009 at 4:42 am
these recent initiative to address weakening economy problem are interesting.