The Fed could end up owning my mortgage, and yours too.
The Fed announced a new monetary easing plan this afternoon. The Fed can add money to the economy by buying anything at all, and it has decided that for the foreseeable future or until the performance of the economy improves broadly, it will buy $40 billion per month in mortgage bonds and other mortgage-backed securities.
With that kind of money, it won’t take long to make the Fed a major player in the real estate market. By 2019, if the Fed were to focus on home mortgages, it could indirectly own half of the home mortgages in the country. (Someone with a better sense of the real estate market may have a more accurate way of gauging the magnitudes involved.)
This move may also signal the Fed’s worries about Freddie Mac and Fannie Mae. The Fed’s move into real estate could take away some of the stress in the mortgage markets if those mortgage-market players are ultimately shut down. That’s a move that the White House and Treasury have hinted could come as soon as next year, though others have suggested that both companies could stay open in the end.