03/23/2020 | by

The Federal Reserve said today that it would significantly expand its purchases of mortgage backed securities, helping provide liquidity to the nation’s mortgage markets.

The Fed said that its purchases of mortgage securities would essentially be unlimited and that it would buy $250 billion of the securities this week. The announcement followed the Fed’s statement last week that it would buy $700 billion of Treasury and mortgage securities, which it quickly did.

Today’s Fed announcement also said it would begin buying commercial mortgage backed securities issued by Fannie Mae and Freddie Mac, helping to support the financing market for apartment buildings.

The Fed’s purchases of mortgage securities mirror actions it took in 2008 to bring liquidity to credit markets during that financial crisis.

Today, the Federal Housing Finance Agency (FHFA) also announced its own actions to improve liquidity in the mortgage market. The agency said it would enter into additional dollar roll transactions, which will provide investors in mortgage backed securities with short-term financing for their positions.

The FHFA said collateral for the lending would be limited to agency mortgage backed securities and the transactions would have to be done in auctions to ensure fair pricing.

Last week, the FHFA took placed a 60-day moratorium on foreclosures and evictions of single- family homeowners with FHA insured mortgages. The Department of Housing and Urban Development, the Federal Housing Administration and the GSEs took similar actions.

(Contact: Ron Kuykendall at rkuykendall@nareit.com)

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