The Federal Reserve has announced that by the end of March they will be pulling out of the mortgage market. The Fed’s surprise move to stop buying home loans is creating an investment environment of fears among the various real estate, mortgage and lending players who may be adversely affected by the move.
The Fed is a huge investor of mortgage backed securities. When the Fed stops purchaing home loans it will lead to a big increase in interest rates across the spectrum for all. Thus leading to a falling mortgage domino effect in the market.
The Federal Reserve holds approximately $909 billion in mortgage backed securities right now. In 2009, the Fed purchased 73% of the home loans from Fannie Mae, Freddie Mac and Ginnie Mae.
Mortgage rates are still low as millions of home buyers and homeowners have taken advantage of the cheap money. This counter action on the foreclosure crisis has helped keep the market somewhat stable in this tumultuous time.
I personally feel that this is the final nail in the real estate and mortgage coffin. Housing will be annihilated by the Fed pull out. It will be a domino affect of the last remaining players such as real estate professionals, mortgage brokers, home builders, contractors and anyone associated with real estate will be wiped out.